Question 1

State income tax revenues are much less than sales tax revenues.

Accepted Answer

A) True 
 B)False

Question 2

The Social Security tax is

Accepted Answer

A)  A progressive tax.
B)  A regressive tax.
C)  A proportional tax at low income levels and a regressive tax at higher income levels.
D)  A proportional tax at low income levels and a progressive tax at higher income levels.

Question 3

A merit good is

Accepted Answer

A)  Income payments for which no goods or services are exchanged.
B)  A good society holds to a higher standard in tax regulations.
C)  A good or service that society believes everyone is entitled to a minimal quantity of.
D)  A product that serves as an incentive to produce more output.

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

Which of the following is possible when the market fails?

Accepted Answer

A)  The mix of goods and services is on the production possibilities curve.
B)  It is impossible for government intervention to improve the mix of goods and services.
C)  The mix of goods and services is at the correct point on the production possibilities curve.
D)  The mix of goods and services is the optimal mix.

Question 6

Local governments provide law enforcement,which benefits society,but if the costs of law enforcement exceed the benefits,the result is a situation of

Accepted Answer

A)  Market failure.
B)  Efficiency as long as there is some benefit.
C)  Government failure.
D)  Public choice theory.

Question 7

Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them.What type of market failure is involved?

Accepted Answer

A)  Inequity.
B)  Public goods.
C)  Externalities.
D)  Market power.

Question 8

Externalities

Accepted Answer

A)  Occur because of government failure.
B)  Are the costs or benefits of market activities that "spill over" onto third parties.
C)  Occur because of selfish consumers.
D)  Occur because demand is hidden.

Question 9

Which of the following is a sound economic reason why the government should subsidize your college education?

Accepted Answer

A)  To help the school's monopoly power over private schools.
B)  It is too expensive.
C)  There are external benefits associated with education.
D)  The profit motive would cause the private sector to overproduce education.

Question 10

The most desirable combination of output attainable with existing resources,technology,and social values is known as the

Accepted Answer

A)  Optimal mix of output.
B)  Efficient mix of output.
C)  Optimal mix of production.
D)  Efficient choice of production.

Question 11

Social demand equals market demand plus externalities when there are positive external benefits.

Accepted Answer

A) True 
 B)False

Question 12

Government waste implies that the public sector is not producing as many services as it could with the resources at its disposal.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" implies the harm caused to nonsmokers is

Accepted Answer

A)  An example of a public good.
B)  Included in the market price of cigarettes.
C)  A source of market failure.
D)  An example of government failure.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If the economy relies entirely on the market mechanism to answer the WHAT,HOW,and FOR WHOM questions,it tends to

Accepted Answer

A)  Overproduce goods that yield external benefits and overproduce those that generate external costs.
B)  Overproduce goods that yield external benefits and underproduce those that generate external costs.
C)  Underproduce goods that yield external benefits and overproduce those that generate external costs.
D)  Underproduce goods that yield external benefits and underproduce those that generate external costs.

Question 17

Transfer payments are payments to individuals for which nothing is currently rendered in return.

Accepted Answer

A) True 
 B)False

Question 18

Explain why government-funded college education can be considered a role of the government.

Accepted Answer

An externality is a cost or benefit of a...

Question 19

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 20

The federal personal income tax system is regressive.

Accepted Answer

A) True 
 B)False

Exam 4: The Role of Government

A merit good is

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The most desirable combination of output attainable with existing resources,technology,and social values is known as the

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Transfer payments are payments to individuals for which nothing is currently rendered in return.

Correct AnswerverifiedShow Answer

The Social Security tax is

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Government waste implies that the public sector is not producing as many services as it could with the resources at its disposal.

Correct AnswerverifiedShow Answer

Local governments provide law enforcement,which benefits society,but if the costs of law enforcement exceed the benefits,the result is a situation of

Correct AnswerverifiedShow Answer

Which of the following is possible when the market fails?

Correct AnswerverifiedShow Answer

Which of the following is a sound economic reason why the government should subsidize your college education?

Correct AnswerverifiedShow Answer

Market failure implies that the market mechanism

Correct AnswerverifiedShow Answer

If the economy relies entirely on the market mechanism to answer the WHAT,HOW,and FOR WHOM questions,it tends to

Correct AnswerverifiedShow Answer

State income tax revenues are much less than sales tax revenues.

Correct AnswerverifiedShow Answer

Social demand equals market demand plus externalities when there are positive external benefits.

Correct AnswerverifiedShow Answer

Explain why government-funded college education can be considered a role of the government.

Correct AnswerverifiedAn externality is a cost or benefit of a...View AnswerShow Answer

The federal personal income tax system is regressive.

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A natural monopoly is

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A World View article titled "Secondhand Smoke Kills 600,000 People a Year: Study" implies the harm caused to nonsmokers is

Correct AnswerverifiedShow Answer

Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them.What type of market failure is involved?

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

Externalities

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

Correct AnswerverifiedShow Answer

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An externality is a cost or benefit of a...
View Answer

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