Question 1

Market power creates a flawed response to an accurate price signal.

Accepted Answer

A) True 
 B)False

Question 2

The market will overproduce goods that have external costs because

Accepted Answer

A)   Producers experience lower costs than society.
B)   Producers experience higher costs than society.
C)   The government is not able to produce these goods.
D)   Producers cannot keep these goods from consumers who do not pay, so they have to produce greater amounts.

Question 3

The federal personal income tax system is regressive.

Accepted Answer

A) True 
 B)False

Question 4

The federal government's role in providing aid to the poor and the aged is justified because of concerns about

Accepted Answer

A)   Market power.
B)   Inequity.
C)   Macro failure.
D)   Restricted supply.

Question 5

A natural monopoly is

Accepted Answer

A)   An industry that is dominated by a single firm.
B)   An industry in which one firm can achieve economies of scale over the entire range of market supply.
C)   An unregulated monopoly.
D)   A monopoly that always benefits society even when it is unregulated.

Question 6

Government failure means that government intervention fails to move us closer to our economic goals.

Accepted Answer

A) True 
 B)False

Question 7

Government intervention that fails to improve economic outcomes is known as market failure.

Accepted Answer

A) True 
 B)False

Question 8

Government intervention can serve to stabilize the macro economy by

Accepted Answer

A)   Reducing inflation and encouraging the equitable distribution of income.
B)   Reducing employment and encouraging economic growth.
C)   Regulating monopolies and encouraging the equitable distribution of output.
D)   Reducing inflation and encouraging economic growth.

Question 9

In a market economy, producers will produce the goods and services that

Accepted Answer

A)   Producers want to purchase.
B)   Consumers demand.
C)   Consumers need the most.
D)   Optimize producer utility.

Question 10

Government failure may result from

Accepted Answer

A)   Operational inefficiency by the public sector only.
B)   Misallocation of resources only.
C)   Accurate valuations of benefits but inaccurate valuations of costs.
D)   Outright waste of resources by the public sector or misallocation of resources.

Question 11

Market failure can occur even when the price signals are accurate.

Accepted Answer

A) True 
 B)False

Question 12

The primary function of taxes is to

Accepted Answer

A)   Transfer command over resources from the private sector to the public sector.
B)   Increase the purchasing power of the private sector.
C)   Increase private saving.
D)   Correct inequities in the distribution of goods and services.

Question 13

Market failure implies that the market mechanism

Accepted Answer

A)   Leads the economy to a point outside the production possibilities curve.
B)   Leads the economy to the wrong mix of output.
C)   Causes shortages or surpluses in the market.
D)   Causes government failure.

Question 14

Which of the following statements is inaccurate?

Accepted Answer

A)   There is substantial agreement about how and when markets fail.
B)   There is substantial agreement about whether government improves market outcomes.
C)   Voters are quick to blame government meddling for many economic woes.
D)   Ideally, the market mechanism will lead an economy to the optimal mix of output.

Question 15

Public choice theory emphasizes the role of self-interest in public decision making.

Accepted Answer

A) True 
 B)False

Question 16

If production in the economy is efficient, then changes in market prices

Accepted Answer

A)   Move us along the perimeter of the production possibilities curve.
B)   Move us to a point above the production possibilities curve.
C)   Move us from a point below the production possibilities curve to a point on the production possibilities curve.
D)   Have no effect on our position on the production possibilities curve.

Question 17

Suppose that if your income is $100,000, your tax is $20,000, but if your income is $200,000, your tax is $45,000. Such a tax is

Accepted Answer

A)   Regressive.
B)   Progressive.
C)   Proportional.
D)   A flat tax.

Question 18

Any imperfection in the market mechanism that prevents optimal outcomes is known as

Accepted Answer

A)   Market failure.
B)   Government failure.
C)   External cost.
D)   Public cost.

Question 19

Cities and other local governments receive most of their tax revenues from

Accepted Answer

A)   Local income taxes.
B)   Sales tax.
C)   Property taxes.
D)   Excise taxes.

Question 20

The theory of public choice

Accepted Answer

A)   Examines why the public rejects so many bond referendums.
B)   Emphasizes the self-interest of decision makers and voters.
C)   Examines how a policy of laissez faire works to allocate resources.
D)   Explains the selfless pursuit of public goals by public servants.

Exam 4: The Role of Government

The primary function of taxes is to

Correct AnswerverifiedShow Answer

Market failure can occur even when the price signals are accurate.

Correct AnswerverifiedShow Answer

Government intervention can serve to stabilize the macro economy by

Correct AnswerverifiedShow Answer

A natural monopoly is

Correct AnswerverifiedShow Answer

Any imperfection in the market mechanism that prevents optimal outcomes is known as

Correct AnswerverifiedShow Answer

Government failure may result from

Correct AnswerverifiedShow Answer

Government intervention that fails to improve economic outcomes is known as market failure.

Correct AnswerverifiedShow Answer

Cities and other local governments receive most of their tax revenues from

Correct AnswerverifiedShow Answer

Market power creates a flawed response to an accurate price signal.

Correct AnswerverifiedShow Answer

The federal government's role in providing aid to the poor and the aged is justified because of concerns about

Correct AnswerverifiedShow Answer

In a market economy, producers will produce the goods and services that

Correct AnswerverifiedShow Answer

Suppose that if your income is $100,000, your tax is $20,000, but if your income is $200,000, your tax is $45,000. Such a tax is

Correct AnswerverifiedShow Answer

Market failure implies that the market mechanism

Correct AnswerverifiedShow Answer

The theory of public choice

Correct AnswerverifiedShow Answer

The market will overproduce goods that have external costs because

Correct AnswerverifiedShow Answer

Public choice theory emphasizes the role of self-interest in public decision making.

Correct AnswerverifiedShow Answer

Which of the following statements is inaccurate?

Correct AnswerverifiedShow Answer

Government failure means that government intervention fails to move us closer to our economic goals.

Correct AnswerverifiedShow Answer

If production in the economy is efficient, then changes in market prices

Correct AnswerverifiedShow Answer

The federal personal income tax system is regressive.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified