Microeconomics CH. 5 Public Spending and Public Choice - Quiz

Suppose that the State of New York decides to subsidize the cost of purchasing a treadmill for cardiac​ patients, as prescribed by their doctors. Prior to the​ program, the equilibrium price of treadmills was​ $800, and the equilibrium quantity purchased was​ 50,000. The state decides to subsidize ​$500 of the cost of the​ treadmill, and with the​ subsidy, the quantity that consumers wish to purchase is​ 70,000. Manufacturers are willing to supply this quantity at a price of​ $1,000. 1. The cost of this program to the State of New York is ​$______ 2. After the subsidy, consumers will pay ____% of the cost of the treadmill, and the state will pay ____% of the cost

1. $35 million 2. 50%, 50%

Which of the following is an example of a transfer in kind​? A. Food stamps. B. Social Security. C. Disability benefits. D. Unemployment insurance benefits.

A. Food stamps.

Does an Internet search engine satisfy the key characteristics of a public​ good? A. No, it has the characteristic of non-rivalrous consumption, but advertisers can be excluded and be made to pay B. No, because it can be used by many people simultaneously at no additional opportunity cost, but users could not be excluded. C. Yes, because the principle of rival consumption does not apply and it would be too costly to exclude users. D. Yes, because it can be used by many people simultaneously at some additional opportunity cost , and it would be impossible to exclude users.

A. No, it has the characteristic of non-rivalrous consumption, but advertisers can be excluded and be made to pay

The incentive structure is a A. system of rewards and punishments that individuals consider when making decisions. B. system of infrastructure in the United States that improves commerce. C. system of checks and balances in the government. D. system determined by the federal government that gives certain states more federal funds.

A. system of rewards and punishments that individuals consider when making decisions.

Which of the following is not a difference between market and collective decision​ making? A. Government goods are often provided free of​ charge, while market goods have a price. B. Government goods are costless to​ produce, while private goods have production costs. C. The government can use expropriation to extract​ payments, but private firms cannot. D. Money payments can signal intensity of desire for a​ product, but voting cannot.

B. Government goods are costless to​ produce, while private goods have production costs.

A tax is sometimes used by government to correct the problems associated with A. external benefits. B. negative externalities. C. internal benefits. D. positive externalities.

B. negative externalities.

Subsidizing medical services through Medicare A. makes the quantity supplied of medical services smaller than the quantity demanded. B. raises the price per unit of medical care received by producers. C. makes the quantity demanded of medical services smaller than the quantity supplied. D. lowers the price per unit of medical care received by producers.

B. raises the price per unit of medical care received by producers.

When a firm produces a product that creates external​ costs, A. the firm produces a level of output which would be the same as it would produce without the external cost. B. the firm produces a level of output larger than would be produced without the external cost. C. the market provides the efficient level of output even with the existence of the external cost. D. the firm produces a level of output smaller than would be produced without the external cost.

B. the firm produces a level of output larger than would be produced without the external cost.

The French government recently allocated the equivalent of more than​ $120 million in public funds to Quaero ​(Latin for​ "I ​ search"), an Internet search engine analogous to Google or Yahoo. Is a publicly funded Internet search engine a public good or a government sponsored​ good? A. It is a public​ good, deemed socially desirable through the political process. B. It is a public​ good, unlikley to be provided in the private market. C. It is a government sponsored​ good, deemed socially desirable through the political process. D. It is a government sponsored​ good, deemed politically desirable through the political process.

C. It is a government sponsored​ good, deemed socially desirable through the political process.

Which of the following is NOT a consequence of the introduction of the Medicare​ program? A. an increased quantity of medical services demanded B. an increased ability for the elderly to obtain medical services C. a reduced demand for medical services D. an increased ability for the poor to obtain medical services

C. a reduced demand for medical services

Examples of​ transfers-in-kind include A. tax rebates on both the federal and state levels. B. taxes on alcohol and tobacco. C. food stamps and public housing. D. foreign aid.

C. food stamps and public housing.

Under present U.S. federal​ law, which one of the following is a government inhibited ​good? A. education B. medical care C. marijuana D. housing

C. marijuana

Other than correcting​ externalities, other economic functions of government include A. deciding what to​ produce, how to produce it and for whom to produce for all sectors of the economy. B. income redistribution and the regulation and provision of merit and demerit goods. C. providing a legal​ system, allocating public​ goods, promoting​ competition, and stabilizing the economy. D. deciding which states may or may not impose income​ taxes, charge fees and enforce contracts.

C. providing a legal​ system, allocating public​ goods, promoting​ competition, and stabilizing the economy.

The concept that Mr. Jones is going to enjoy the benefits of police protection even though he no longer pays taxes is called A. the principle of​ anti-trust. B. the principle of rival consumption. C. the​ free-rider problem. D. the negative externality principle.

C. the​ free-rider problem.

A situation in which a market economy leads to too few or too many resources going to a particular economic activity is known as A. excessive competition. B. competition. C. destructive competition. D. a market failure.

D. a market failure.

One characteristic of a public good is that it A. can be easily subdivided into small units. B. always eliminates the​ free-rider problem. C. is available for consumption by only a few individuals at any particular time. D. can be consumed simultaneously by many individuals.

D. can be consumed simultaneously by many individuals.

Market failure occurs because A. the market system does not make individuals responsible for the private​ costs/benefits of their actions. B. the market system forces individuals to consider the social and private consequences of their actions. C. the market system forces individuals to consider the social consequences of their actions. D. the market system does not make individuals responsible for the social​ costs/benefits of their actions.

D. the market system does not make individuals responsible for the social​ costs/benefits of their actions.