UTA ECON 2305 Lesson 9
Which of the following is not an economic function of government? A. Income redistribution. B. Ensuring economy-wide stability. C. Promoting competition. D. Providing a legal system.
A. Income redistribution.
Which of the following is not a political function of the government that leads to involvement in the economy? A. Public goods. B. Income redistribution. C. Merit and demerit goods. D. In-kind transfers.
A. Public goods.
Which of the functions of government below is not a normative function of government? A. legislative regulation or prohibition when negative externalities are present B. the regulation of government-inhibited goods C. income redistribution D. the provision of government-sponsored goods
A. legislative regulation or prohibition when negative externalities are present
The study of collective decision making, or the process through which voters, politicians and other interested parties influence nonmarket choices is known as A. public choice theory. B. a private choice theory. C. antitrust legislation. D. the exclusion principle.
A. public choice theory.
The explicit redistribution of income uses A. transfer payments and income transfers in kind. B. regulations and transfer payments. C. provision of public goods and regulations. D. income transfers in kind and the minimum wage.
A. transfer payments and income transfers in kind.
Money payments made by governments to individuals for which no services or goods are concurrently rendered are known as A. transfer payments. B. black market payments. C. demerit payments. D. merit payments.
A. transfer payments.
Similarities in decision making between the private and public sectors include all of the following except A. use of force. B. similarities in individuals working in each sector. C. opportunity cost. D. competition.
A. use of force.
Which of the following statements is true concerning the consequences of rent controls? A. Property owners are big winners since they receive a guaranteed amount of rent. B. Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices. C. Construction companies are big winners because more housing units are being built due to guaranteed rental income. D. Low income earners are big winners since it is easier to obtain housing. E. All of the above.
B. Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices.
The consequences of decriminalizing illegal drugs have long been debated. Some claim that legalization will lower the price of these drugs and reduce related crime. Others claim that more people will use these drugs. Suppose that some of these drugs are legalized so that anyone may sell them and use them. Based on positive economic analysis, such decriminalization will lead to A. an increase in quantity demanded of these drugs and in price. B. a reduction in price of these drugs and an increase in quantity demanded. C. a reduction in quantity demanded of these drugs and an increase in price. D. a reduction in both quantity demanded of these drugs and in price.
B. a reduction in price of these drugs and an increase in quantity demanded.
An above-equilibrium minimum wage will result in ________ in the quantity of labor demanded and ________ in the quantity of labor supplied. A. a decrease; a decrease B. a decrease; an increase C. an increase; an increase D. an increase; a decrease
B. a decrease; an increase
Which of the following is a common example of a government-sponsored good? A. tobacco products B. museums C. gambling D. alcohol
B. museums
In a rent controlled market, we would expect to observe A. greater ease on the part of potential tenants in finding an apartment to rent. B. renters moving into the market to take advantage of the lower rents. C. increased construction of apartment buildings. D. landlords encouraging tenants to sublet their apartments.
B. renters moving into the market to take advantage of the lower rents. Because controlled rents are usually below market clearing levels, there will be an excess demand for rentable units. This excess demand will appear in the form of tenants having greater difficulty finding a place to rent.
Suppose the market price of corn is $5 a bushel but the government sets a price of $7. As a result, A. farmers will reduce planting until the market price is $7. B. the government must purchase the surplus to maintain the price. C. there is a shortage of corn. D. the private demand will increase over time until $7 is the market price.
B. the government must purchase the surplus to maintain the price. Because production exceeds the amount that consumers want to buy at the support price, the government has to buy the surplus — the difference between quantity demanded and quantity supplied — if the price support program is to work.
Sports stadiums, museums, ballets, plays, and concerts are examples of A. discretionary goods. B. government-sponsored goods. C. jurisdictional goods. D. capital goods.
B. government-sponsored goods.
What is the economic effect of price ceilings? A. An effective price ceiling will lead to a surplus. B. Resources will be allocated efficiently. C. An effective price ceiling will lead to a shortage. D. There are no economic effects.
C. An effective price ceiling will lead to a shortage.
The two primary money transfer payments in our system are A. Disability benefits and unemployment insurance benefits. B. Social Security old-age and disability benefits and welfare benefits. C. Social Security old-age and disability benefits and unemployment insurance benefits. D. Welfare benefits and unemployment insurance benefits.
C. Social Security old-age and disability benefits and unemployment insurance benefits.
What is the economic effect of price floors? A. A black market will emerge. B. Shortages. C. Surpluses. D. There are no economic effects.
C. Surpluses. Effective price floors give rise to an excess of quantity supplied over quantity demanded. More is available for sale than buyers wish to purchase.
The minimum wage is an example of A. an input quota. B. a price ceiling. C. a price floor. D. an effective wage rate.
C. a price floor. The minimum wage is a government legislated wage floor that sets the lowest hourly rate that firms may legally pay workers.
A price ceiling is A. a government-imposed minimum price that may be charged for a good or service, which can lead to surpluses. B. a government-imposed maximum price that may be charged for a good or service, which can lead to surpluses. C. a government-imposed maximum price that may be charged for a good or service, which can lead to shortages. D. a government-imposed minimum price that may be charged for a good or service, which can lead to shortages.
C. a government-imposed maximum price that may be charged for a good or service, which can lead to shortages.
Differences in decision making between the private and public sectors include all of the following except A. the amount of consumer payment required for goods produced by each sector. B. use of force. C. competition. D. the type of voting system used in each sector.
C. competition.
One reason that collective and private decision making differ is A. the government actions do not have an opportunity cost while private actions do. B. private individuals compete and act in their own interest while government bureaucrats do not. C. individuals working in the government sector face a different incentive structure than those in the private sector. D. there is no difference between collective and private decision making.
C. individuals working in the government sector face a different incentive structure than those in the private sector.
Black markets usually arise when there are A. price floors. B. price quotas. C. price ceilings. D. price subsidies
C. price ceilings.
As long as a price floor is ________ the market clearing price, imposing a price floor creates a ________. A. below; surplus B. below; shortage C. above; surplus D. above; shortage
C. above; surplus
In the decision making process for markets and the public sector A. the spending of dollars can indicate intensity of want, but political voting does not. B. dollars spent count as votes in the market system, but in the public sector one person gets one vote. C. the market system is run by proportional voting rules and the public sector is run by majority rule. D. All of the above.
D. All of the above.
Price ceilings, such as rent controls A. discourage the construction of new housing. B. reduce tenant mobility as people may be reluctant to change apartments. C. lead to the deterioration of existing housing. D. All of the above.
D. All of the above.
Labor is a key input at fast-food restaurants. Suppose that the government boosts the minimum wage above the equilibrium wage of fast-food workers. Which of the following best describes the response of the quantity of labor employed at restaurants? A. More workers will be employed since the wage increase tells managers that more workers are available. B. More workers will be employed since the wage increase encourages people to seek jobs at these restaurants. C. The same number of workers will be employed since a restaurant's operation requires a fixed amount of labor. D. Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.
D. Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor. The higher wage makes labor a relatively more expensive input and encourages firms to substitute other inputs for labor. Thus fewer workers will be employed.
A good that has been deemed socially desirable through the political process is known as A. a positive externality. B. a demerit good. C. a free-rider. D. a merit good.
D. a merit good.
The city of New Raven has decided to impose rent controls on office buildings in the city. As a result of this, the new rent A. celing is higher than the equilibrium rent and there will be a surplus of rental offices. B. floor is equal to the equilibrium rent and there will be a surplus of rental offices. C. floor is lower than the equilibrium rent and there is no shortage of rental offices. D. ceiling is lower than the equilibrium rent and there will be a shortage of rental offices.
D. ceiling is lower than the equilibrium rent and there will be a shortage of rental offices.
A government agency is contemplating launching an effort to expand the scope of its activities. One rationale for doing so is that another government agency might make the same effort and, if successful, receive larger budget allocation in future years. Another rationale for expanding the agency's activities is that this will make the jobs of its workers more interesting, which may help the agency attract better-qualified employees. Nevertheless, to broaden its legal mandate, the agency will have to convince more than half of the House of Representatives and the Senate to approve a formal proposal to expand its activities. In addition, to expand its activities, the agency must have the authority to force private companies it does not currently regulate to be officially licensed by agency personnel. The behavior of the government agency is similar to a profit-seeking private enterprise in all of the following aspects, except A. the government agency is promoting competition. B. the government agency attempts to make its workers' jobs more interesting. C. the government agency attempts to increase its budgetary allocations. D. the government agency depends on majority rule to enact the changes that it is seeking.
D. the government agency depends on majority rule to enact the changes that it is seeking.
The theory of public choice is the study of A. how the price system allocates resources in the public sector. B. how legal coercion influences the allocation of resources in the private sector. C. the study of the system of rewards or punishments in the private sector. D. the process through which voters, politicians, and other interested parties interact to influence nonmarket choices.
D. the process through which voters, politicians, and other interested parties interact to influence nonmarket choices.
Which of the following is a dissimilarity between the market sector and the public sector decision making? A. the existence of an opportunity cost associated with every action B. the types of individuals working in the private sector and working in the public sector C. the existence of competition D. the type of voting system
D. the type of voting system
Which of the following is a similarity between the market sector and the public sector decision making? A. goods are furnished to the ultimate consumers without payment required B. governments can resort to using force in their regulation of economic affairs C. a dollar voting system is in effect D. there is an opportunity cost associated with every action
D. there is an opportunity cost associated with every action
As long as a price ceiling is ________ the market clearing price, imposing a price ceiling creates a ________. A. above; surplus B. below; surplus C. above; shortage D. below; shortage
D. below; shortage
Evidence indicates that the group which benefits most from rent ceilings is A. local municipalities. B. property owners. C. low-income individuals. D. upper-income professionals.
D. upper-income professionals.
A government-sponsored good is defined as
any good that the political process has deemed worthy of public support. Examples of government-sponsored goods in our society are sports stadiums, museums, ballets, plays, and concerts.
An effective price ▼ basement roof floor ceiling is an enforced regulation that sets the legal price below the market clearing price, which often leads to nonprice rationing devices and ▼ black legal efficient markets.
ceiling;black
Governments sometimes impose price controls in the form of price ▼ roofs ceilings and price ▼ basements floors .
ceilings; floors
Most of the benefits from agricultural price supports have gone to small, family-owned farms. A. True B. False
false
Rent control is a type of price floor. A. True B. False
false
The minimum wage is an example of a price ceiling. A. False B. True
false
Transfer payments are money payments made by governments in exchange for goods or services. A. False B. True
false
When a ▼ ceiling floor is placed on wages at a rate that is above market equilibrium, the result is an excess quantity of labor supplied at that minimum wage.
floor
One set of political, or normative, activities of the government includes the provision and regulation of ▼ government-owned government-sponsored goods and ▼ government-inhibited government-transfer goods.
government-sponsored government-inhibited
Quantity restrictions may take the form of ▼ export quotas import tariffs import quotas export tariffs which are limits on the quantity of specific foreign goods that can be brought into the United States for resale purposes.
import quotas
In advance of the recent increase in the U.S. minimum wage rate, the government of the state of Arizona decided to boost its own minimum wage by $1.60 per hour. This pushed the wage rate earned by Arizona teenagers above the equilibrium wage rate in the teen labor market. What is the predicted effect of this action by Arizona's government on each of the following? The quantity of labor supplied by Arizona teenagers will ▼ increase change in an unpredictable way decrease stayed the same. The quantity of labor demanded by employers of Arizona teenagers will ▼ stayed the same increase decrease change in an unpredictable way The number of unemployed Arizona teenagers in this city will ▼ stayed the same decrease change in an unpredictable way increase
increase (The imposition of the price floor would have changed the quantity demanded of labor and the quantity supplied of labor since it is a change in the good's (service's) own price. The higher wage will increase the quantity supplied. OK) decrease (The imposition of the price floor would have changed the quantity demanded of labor and the quantity supplied of labor since it is a change in the good's (service's) own price. The higher wage will lower the quantity demanded.) increase (As the wage rises above the equilibrium wage, the quantity demanded will fall but the quantity supplied will rise.)
In 2016, the government of a nation established a price support for wheat. The government's support price has been above the equilibrium price each year since, and the government has purchased all wheat over and above the amounts that consumers have bought at the support price. Every year since 2016, there has been an increase in the number of wheat producers in the market. No other factors affecting the market for wheat have changed. Predict what has happened every year since 2016 to each of the following: The quantity of wheat supplied by wheat producers has ▼ changed in an unpredictable way stayed the same increased decreased The quantity of wheat demanded by wheat consumers has ▼ decreased increased stayed the same changed in an unpredictable way The quantity of wheat purchased by the government has ▼ increased stayed the same changed in an unpredictable way decreased.
increased stayed the same increased
The political system is run by ▼ proportional majority rule, whereas the market system is run by ▼ majority proportional rule.
majority proportional
As in private markets, ▼ opportunity cost marginal cost and ▼ rival consumption competition have incentive effects that influence public-sector decision making. In contrast to private market situations, however, there is not a one-to-one relationship between consumption of a publicly provided good and the payment for that good.
opportunity cost competition
transfer payments
payments made to individuals for which no services or goods are rendered inreturn
income transfers in kind
payments which people must direct to spending on specified goods.
The theory of ▼ private choice rival consumption public choice examines how voters, politicians, and other parties collectively reach decisions in the public sector of the economy.
public choice
▼ Relative Rental Spot Equilibrium prices perform threefunctions: (1) allocating existing scarce housing among competing claimants, (2) promoting efficient maintenance of existing houses and stimulating new housingconstruction, and (3) rationing the use of existing houses by current demanders.
rental
With an agricultural price- ▼ control support system, the government sets a minimum price at which, say, qualifying farm products can be sold. Any farmers who cannot sell at that price in the market can "sell" their surplus to the government. The only way this system can survive is for the government or some other entity to buy up the excess quantity supplied at the support price.
support
The theory of public choice refers to
the analysis of collective decision making involving voters, politicians, political parties, interest groups, and many others.
Government-inhibited goods are
the opposite of government-sponsored goods. They are goods that, through the political process, have been deemed undesirable for human consumption. Heroin, cigarettes, gambling, and cocaine are examples. The government exercises its role with respect to these goods by taxing, regulating, or prohibiting their manufacture, sale, and use.
The explicit redistribution of income uses two systems to redistribute income:
the progressive income tax and transfer payments. Transfer payments are payments made to individuals for which no services or goods are rendered in return. The two primary money transfer payments in our system are Social Security old-age and disability benefits and unemployment insurance benefits. Income redistribution also includes a large amount of income transfers in kind, which people must direct to spending on specified goods, in contrast to money transfers that they can allocate to spending on any items they desire.
▼ transfer payments income transfers in kind are payments made to individuals for which no services or goods are rendered inreturn, compared with ▼ transfer payments income transfers in kind which people must direct to spending on specified goods.
transfer payments income transfers in kind
A black market is a market in which a price-controlled good is sold at an illegally high price. A. False B. True
true
An import quota is a supply restriction that prohibits the importation of more than a specified quantity of a particular good in a one-year period. A. True B. False
true
The provision of public education is at least in part an attempt to redistribute income by making sure that the poor have access to education. A. True B. False
true
Heroin, cigarettes, gambling, and cocaine are examples of A. government-sponsored goods. B. discretionary goods. C. government-inhibited goods. D. jurisdictional goods.
Heroin, cigarettes, gambling, and cocaine are examples of A. government-sponsored goods. B. discretionary goods. C. government-inhibited goods. D. jurisdictional goods.
