Module 4
When the government provides streetlights, it is addressing which of the following?
A public good
When the government makes sure that gas pumps accurately measure the amount of gas they provide, it is addressing which type of market failure?
Imperfect information
The Commonwealth of Virginia relies most heavily on which type of tax revenue?
Income taxes
Which of the following is the United States' primary antitrust law?
The Sherman Act
intellectual property
The products of a person's creative and intellectual thinking are considered intellectual property. This could include art, music, or writing a person has created.
True or false: A contract is a legal agreement between two parties that is enforceable by law.
True
True or false: A government provides national defense because it is a public good.
True
True or false: A law that prevents smoking on airplanes addresses a negative externality.
True
True or false: Externalities exist when the costs or benefits of a transaction fall on someone not involved in it.
True
Which of the following results in a positive externality?
Your classmate gets a flu shot
When I get a vaccination, it creates both a private benefit and a(n) _______.
external benefit .
Medicare, Medicaid, and the CHIP program are all safety net programs that provide [assistance].
healthcare
5 Types of Market Failures
public goods - goods are available to all and once they are provided can be obtained by others without payment. externalities - when the costs or benefits of an action fall on others. market power - reduced competition (for example, a monopoly). inequity - income redistribution to address unfairness. imperfect information - when buyers or sellers do not have the information required to accurately weigh the costs and benefits of a decision.
horizontal merger
the combination of two or more firms competing in the same market with the same good or service
vertical merger
the combination of two or more firms involved in different stages of producing the same good or service (ex. sandwich shop buying a bakery, car manufacturer merging with a car parts company)
conglomerate merger
the joining of firms in completely unrelated industries
If a chain of sandwich shops buys a bakery, the merger is _______.
vertical
Which of the following can the government use to address an externality?
1. Command and control regulations 2. A tax 3. A subsidy 4. Tradeable permits
Contracts do which of the following?
1. Create a legal agreement enforceable by law 2. Specify the terms of an agreement between parties 3. Encourage economic activity 4. Facilitate trust between parties in a market
Public education results in which of the following?
1. External benefits 2. Private benefits 3. More education than would be provided by the market 4. Positive externalities
Which of the following is an example of a public good?
1. National defense 2. Public Park 3. Clean Air 4. State roads
Which of the following is an example of the government addressing a market failure?
1. Redistributing income through the tax system 2. Regulating pollution 3. Requiring accurate product labeling 4. Providing national defense
Which of the following is a safety net program that redistributes income?
1. Supplemental Nutrition Asistance Program (SNAP) 2. National School Lunch Program 3. Medicaid 4. Children's Health program (CHIP)
Governments provide information to protect which of the following?
1. The environment 2. Labor 3. Consumers 4. Competitors
State and local governments generally fund which of the following types of services?
1. Transportation 2. Public safety 3. Public welfare 4. Education
Which of the following is true about pollution from a firm emitting waste into the environment? It
1. is a negative externality. 2. decreases the firm's private cost 3. creates an external cost 4. leads to greater than the efficient level of production
Because people who are more likely to get sick are more likely to buy health insurance, insurance companies face imperfect information due to ___________.
Adverse selection .
Antitrust laws make which of the following illegal?
Anti-competitive behaviors
Free riding is likely to occur with the provision of _______
Asteroid defense
Which of the following is true regarding the Gini Index and the income distribution in the United States since 1970? Gini Index Income distribution A. increase - more equal B. increase - less equal C. decrease - more equal D. decrease - less equal E. decrease - no change
B
Which regulatory agency protects consumers from injury or death resulting from the use of a product?
CPSC
The government grants which of the following to protect the property rights of writers and composers?
Copyrights
Which regulatory agency protects workers from discrimination in the workplace?
EEOC
The _______ protects the environment.
EPA
You can have your cake or choose to eat it. This is an example of property rights providing the right for you to _______.
Enjoy property
You can choose to sell your house to someone else. This is an example of property rights providing the right for you to ________.
Exchange property
No trespassing signs are an example of owners enforcing their right to ____________.
Exclude people from your property
The _____ promotes competition
FTC
The SNAP and CHIP programs provide food to families and children and are part of the safety net provided by the federal government.
False
True or false: A common property good, like the fish in an ocean, are both nonrival and non-excludable.
False
True or false: If two television networks merge, it is a vertical merger.
False
True or false: Producing a good is efficient as long as the external benefits exceed the external costs.
False
True or false: The clothes, books, electronics, sports equipment, etc. that you own are examples of real property.
False
True or false: There are never unintended consequences of government intervention to address market failures.
False
True or false: Without government intervention, public goods will be overproduced.
False
True or false: You can not own the rights to music, art, writing, or other creative endeavors.
False
What problem exists when people who can't be excluded from using a good choose not to pay for it?
Free-rider problem
When the government requires ingredient labels on products, it is trying to remedy a market failure due to ________.
Imperfect information
The federal government relies most heavily on which type of tax revenue?
Income taxes
When the government provides free and reduced lunches to low-income students, it is addressing which type of market failure?
Inequity
Which of the following is true for the federal government budget each year?
It can spend more than it gets in tax revenues
Government failure occurs when the benefits of regulation are
Lower than the costs
Government regulations that prevent two firms from merging to become a monopoly address which type of market failure?
Market power
When people take more risks because they know that they are protected from the costs of their actions, ___________ creates a market failure.
Moral hazard
An accident caused by texting and driving is an example of a(n) ________
Negative externality
Government regulations that prevent a firm from dumping toxic waste into a river address which type of market failure?
Negative externality
Too much of a good or service is produced when there is a
Negative externality
The socially optimal number of lighthouses will not be provided by the market because they are _______.
Non-rival and non-excludable
Worker safety is regulated by ______
OSHA
The government grants which of the following to protect the property rights of inventors?
Patents
Which of the following is a NOT public good provided by the government?
Pollution
Which of the following is an example of a negative externality?
Pollution
Too little of a good or service is produced when there is a
Positive externality
When the government provides K-12 education because educated children provide an external benefit to society, it is addressing which type of market failure?
Positive externality
If low-income families pay 10% of their income in taxes while high-income families pay 20% of their income in taxes, the tax system is which of the following?
Progressive
Property rights
Property rights define what you can and can't do with your property. Well-defined private property rights give you the right to; own property control property enjoy the use of property exchange or dispose of property exclude others from enjoying all these rights to property you own
Real property
Real estate, houses, and land are considered real property. This type of property is fixed geographically in one place. It is not mobile.
Which of the following is illegal under antitrust laws?
Restraint of trade
Private goods are _______.
Rival and excludable
______ is a safety net program that provides food assistance.
SNAP
Which of the following categories of spending is the largest for state and local governments?
Social services
True or false: Government failure occurs when a government's attempt to correct a market failure has unintended consequences.
True
True or false: Government intervention is required in the case of a public good because everyone can use the good so no one will pay to produce it.
True
True or false: Governments intervene in the economy to correct market failures.
True
True or false: In Virginia, government agencies that address market failures include the Attorney General, the Department of Labor, and the Department of Environmental Quality.
True
True or false: Local governments are funded by transfers from the state.
True
True or false: Property rights will not prevent littering in a public park.
True
True or false: Regulations regarding the disposal of hazardous waste are intended to prevent negative externalities.
True
True or false: Social costs include both private costs and external costs
True
True or false: State and local government may not run budget deficits.
True
True or false: The Sherman Act is one of the earliest and most important antitrust laws.
True
True or false: The federal income tax system in the United States is progressive.
True
True or false: The government addresses market failures when it enforces property rights.
True
True or false: When there is a market failure, the market outcome is not socially optimal.
True
True or false: With a regressive tax system, people with lower incomes pay a higher percentage of their income in taxes.
True
Personal property
Your clothes, school supplies, and cell phone are considered personal property. This type of property is mobile, so you can move personal property from one place to another.
Antitrust laws make _________ illegal.
anti-competitive behavior
Well-defined and enforced property rights
create incentives for purchases and investments
Liability rules do which of the following?
create obligations based on law
The largest category of spending by the Commonwealth of Virginia is ________.
individual and family services
antitrust laws
laws aimed at eliminating collusion and promoting competition among firms
Sitting near someone who smokes exposes you to "secondhand smoke;" therefore smoking creates a(n) ________.
negative externality
Public goods are
non-rival and non-excludable
If everyone pays a $10 tax, regardless of their income level, the tax is _________.
regressive
The largest category of federal spending in the United States is _________
social security
The government can encourage the production of goods that create positive externalities by creating _______
subsidies
The government is NOT likely to address a negative externality using _________
subsidies
Which of the following goods is both rival and excludable?
A ballpoint pen
Contract definition
A contract is a legal agreement between two parties that is enforceable by law.
regressive tax
A tax for which the percentage of income paid in taxes decreases as income increases
progressive tax
A tax for which the percentage of income paid in taxes increases as income increases
proportional tax
A tax in which the average tax rate is the same at all income levels.