Econ Exam 3: Chapters 7-8, 10-11

An example of a public good is: A) a court of law. B) clothing. C) food. D) a state university.

A) a court of law

Which of the following is an example of an excise tax? A) a tax of $0.41 per gallon of gas B) a tax of 12.4% of your wages C) a tax on the value of your property D) a one-time local government tax of $50

A) a tax of $0.41 per gallon of gas

If external costs exist, the competitive free market: A) allocates resources inefficiently. B) allocates resources efficiently. C) automatically corrects an overallocation of resources. D) automatically corrects an underallocation of resources.

A) allocates resources inefficiently.

An electronic book is an artificially scarce good because we ________ prevent consumption by people who do not pay for it, and the same unit ________ be consumed by more than one person at the same time. A) can; can B) cannot; cannot C) can; cannot D) cannot; can

A) can; can

When the government attempts to reduce the noise from airplanes by restricting the noise level from a jet engine to less than 50 decibels, it is using a(n): A) environmental standard. B) emissions tax. C) Pigouvian tax. D) tradable emissions permit.

A) environmental standard.

Suppose the government decides to fight obesity in America by imposing an excise tax on the saturated fat content of food. The effect of this tax would be to: A) lower the profits of ice cream suppliers. B) decrease revenue for the government. C) decrease black market activity. D) raise the profits of ice cream suppliers.

A) lower the profits of ice cream suppliers.

When Joe watched a television movie, his viewing was ________ in consumption because other people ________ able to view the movie at the same time Joe did. A) non-rival; were B) rival; were C) rival; were not D) non-rival; were not

A) non-rival; were

A private good is a good or service for which exclusion is: A) possible and which is rival in consumption. B) possible and which is nonrival in consumption. C) not possible and which is rival in consumption. D) not possible and which is nonrival in consumption.

A) possible and which is rival in consumption.

An excise tax collected from the producers of a good: A) shifts the supply curve upward. B) creates a loss of revenue for the government. C) has a similar effect as a tax subsidy. D) shifts the supply curve downward.

A) shifts the supply curve upward.

Suppose at the current amount of pollution, the marginal social benefit of pollution is greater than the marginal social cost of pollution, then: A) there is too little pollution. B) there is too much pollution. C) society is achieving the optimal amount of pollution. D) the externality is minimized.

A) there is too little pollution.

Which of the following statements is true? A) It is possible to observe how much people pay for an additional unit of a public good. B) It is difficult for governments to get an accurate estimate of the marginal social benefits of public goods, because individuals have an incentive to distort the truth about their willingness to pay. C) Individuals tend to underestimate the amount of a public good that they desire. D) It is straightforward to estimate the marginal social benefits of public goods.

B) It is difficult for governments to get an accurate estimate of the marginal social benefits of public goods, because individuals have an incentive to distort the truth about their willingness to pay.

Which of the following goods is most likely a common resource? A) the Internet B) a public park C) a pair of pants D) the fire department

B) a public park

Which of the following goods best fit the characteristics of a private good? A) a professor giving a lecture in a large classroom B) an ice-cream cone C) fire protection D) disease prevention

B) an ice-cream cone

Given the supply curve for a good, the more elastic the demand curve, the ________ equilibrium output will fall and the ________ will be the deadweight loss when the government imposes an excise tax. A) more; smaller B) more; larger C) less; smaller D) less; larger

B) more; larger

Which of the following is an example of a non excludable good? A) health care B) national defense C) education D) ice cream

B) national defense

In the UnitedKingdom, most television programming is paid for by a yearly license fee assessed on every television owner. "Television detection vans" go through neighborhoods to detect nonlicensed households and keep them from viewing without paying. This is a good example of ________ provision of ________. A) public; private goods B) private; goods that are nonexcludable in consumption C) public; common resources D) private; artificially scarce goods

B) private; goods that are nonexcludable in consumption

Jack owns a music store. One night vandals broke his store's front window. Jack called the police and the police investigated the crime. The police services that Jack used are best described as: A) private goods. B) public goods. C) artificially scarce goods. D) common resources.

B) public goods.

Tax incidence analysis seeks to determine: A) who actually sends the tax payment to the government. B) the actual burden of where the tax rests. C) who ultimately gets the tax revenue. D) whether a tax is in the benefits-received category or the ability-to-pay category.

B) the actual burden of where the tax rests.

Automobile emissions generate pollution and cause higher costs and discomfort to residents of a city. In this case: A) too few of society's resources are being used to operate automobiles. B) the externality can be internalized into the market by imposing a specific tax on drivers. C) there is an external benefit to society from operating automobiles. D) the externality can be internalized into the market by granting a specific subsidy to drivers.

B) the externality can be internalized into the market by imposing a specific tax on drivers.

Which of the following is an example of a negative externality? A) high prices for necessities such as drinking water in the aftermath of a natural disaster B) the risks to nonsmokers from second-hand smoke C) the increased risk of a traffic accident to an individual who uses a cell phone while driving D) unemployment in the steel industry caused by low prices of imported (external) steel

B) the risks to nonsmokers from second-hand smoke

If the government removed the excise tax on gasoline, which of the following would not occur? A) Consumer surplus would increase. B) Producer surplus would increase. C) Producer surplus would decrease. D) Total surplus would increase.

C) Producer surplus would decrease.

When a worker earns income, she and her employer pay equal portions of FICA(theFederalInsurance Contributions Act). Which of the following statements is true? A) Both the worker and the employer bear half the burden (incidence) of the tax. B) The employer bears almost all the burden (incidence) of the tax. C) The worker bears almost all the burden (incidence) of the tax D) It's impossible to determine who bears the burden (incidence) of the tax.

C) The worker bears almost all the burden (incidence) of the tax

The best example of a common resource is: A) public education. B) a municipal library. C) clean water. D) cable television broadcasting.

C) clean water.

Activities that generate external costs will likely be carried out at levels that ________ those that would be efficient. A) are equal to B) are less than C) exceed D) compete with

C) exceed

If the government imposes a $5 excise tax on the sale of leather shoes and collects the tax from the suppliers, the price of leather shoes will: A) increase by $5. B) increase by more than $5. C) increase by less than $5. D) increase, but we cannot determine by how much.

C) increase by less than $5.

No individual is willing to pay for providing the efficient level of a public good since the: A) marginal cost of production is zero. B) good will be nonrival, and thus underconsumed. C) individual's marginal benefit is less than the marginal social benefit. D) marginal benefit of allowing one more individual to consume the good is zero.

C) individual's marginal benefit is less than the marginal social benefit.

No individual is willing to pay for the efficient quantity of a public good, because the marginal benefit to an individual ________ the marginal social benefit. A) equals B) exceeds C) is less than D) may be equal to or greater than

C) is less than

If left totally to the free market, the amount of police protection provided in a city would be________ than it is now, and free-riders would pay ________ for police protection. A) more; more B) more; nothing C) less; nothing D) less; a higher price

C) less; nothing

Given the demand curve for a good, the more price-elastic the supply curve, the ________ equilibrium output will fall and the ________ will be the deadweight loss when the government imposes an excise tax. A) more; smaller B) more; larger C) less; smaller D) less; larger

C) less; smaller

Given the supply curve for a good, the more inelastic the demand curve, the ________ equilibrium output will fall and the ________ will be the deadweight loss when the government imposes an excise tax. A) more; smaller B) more; larger C) less; smaller D) less; larger

C) less; smaller

The burden of a tax that is imposed on a good is said to fall completely on the producers if the: A) price paid by consumers for the good declines by the amount of the tax. B) price paid by consumers for the good increases by the amount of the tax. C) price paid by consumers does not change. D) wages received by workers who produce the good increase by the amount of the tax.

C) price paid by consumers does not change.

Volunteer fire departments are good examples of ________ provision of________. A) private; private goods B) public; common resources C) private; public goods D) public; artificially scarce goods

C) private; public goods

If the government imposes a $5 excise tax on the sale of leather shoes collected from the supplier and the price of leather shoes does not change: A) the government will receive less tax revenue than anticipated. B) consumers are paying all of the tax. C) producers are paying all of the tax. D) consumers and producers are paying equal amounts of the tax.

C) producers are paying all of the tax.

The incidence of a tax: A) is a measure of the revenue the government receives from the tax. B) refers to who writes the check to the government. C) refers to who in reality pays the tax to the government. D) is a measure of the deadweight loss from the tax.

C) refers to who in reality pays the tax to the government

As the quantity of pollution emissions rises, the marginal social cost of pollution: A) remains constant. B) falls. C) rises. D) rises at first, but eventually falls.

C) rises.

Given that there is general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is: A) zero. B) that level that reduces marginal social costs of pollution to zero. C) the level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution. D) the level of pollution that minimizes the average total cost of producing the product.

C) the level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution.

Which of the following is not an example of an activity that generates an externality? A) Bob's Service Station dumps used oil in the river. B) Bob renovates a run-down house in the neighborhood. C) Bob occasionally drives while drunk. D) Bob's Service Station donates a car to charity.

D) Bob's Service Station donates a car to charity.

For a public good, nonpayers ________ excluded from obtaining the benefits of the good. A) can be B) are automatically C) usually are D) cannot be

D) cannot be

A key element that a public good displays is: A) over production. B) rival consumption. C) payment through charitable contributions. D) nonexclusion.

D) nonexclusion.