Question 1

Reference: 15147 
-(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.By imposing taxes to finance the public good, the government could move the production from R to the efficient level of production of :

Accepted Answer

A)  Q.
B)  U.
C)  W.
D)  X.

Question 2

For a public good, nonpayers _______ excluded from obtaining the benefits of the good.

Accepted Answer

A)  can be
B)  are automatically
C)  usually are
D)  cannot be

Question 3

In the case of a public good:

Accepted Answer

A)  a consumer could be a free rider.
B)  firms get a signal that fully reflects benefits received by consumers.
C)  firms will get signals to produce more than is economically efficient.
D)  it is quite costly to add consumers.

Question 4

Reference: 15165 
-(Exhibit: Market Failure) A competitive market, free of market failures, will achieve the equilibrium point:

Accepted Answer

A)  H.
B)  I.
C)  J.
D)  K.

Question 5

Reference: 15147 
-(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.If the government intervenes to provide the efficient level of a public good, the net gain will be:

Accepted Answer

A)  KVO
B)  TUV
C)  RUVW minus RTVW
D)  B and C are both correct.

Question 6

Paying a tax of $10 on an income of $100, a tax of $25 on an income of $200, and a tax of $60 on an income of $300 is an example of a(n) :

Accepted Answer

A)  progressive tax.
B)  proportional tax.
C)  regressive tax.
D)  constant-rate tax.

Question 7

According to public choice theory, being too busy to take the time off to vote may be the result of:

Accepted Answer

A)  rational participation.
B)  rational abstention.
C)  rent seeking.
D)  ignorance in action.

Question 8

The largest _______ transfer payment in the United States is _______ .

Accepted Answer

A)  non-means-tested; Medicaid
B)  non-means-tested; Social Security payments to retired persons
C)  means-tested; farmers aid
D)  means-tested; Social Security payments to retired persons

Question 9

The study of government expenditure and tax policy and the impacts of these policies on the economy is called:

Accepted Answer

A)  federal choice.
B)  federal deficit.
C)  public finance.
D)  public debt.

Question 10

A progressive tax is one that takes:

Accepted Answer

A)  a fixed percentage of income.
B)  a lower percentage of income as income rises.
C)  a higher percentage of income as income rises.
D)  higher percentage of income as income falls.

Question 11

A condition necessary for a market to achieve economic efficiency is that the market:

Accepted Answer

A)  demand curve must include all opportunity costs imposed on society of producing the good.
B)  demand curve must exclude the willingness to pay of all members of society who benefit from the good.
C)  supply curve must include the willingness to pay of all members of society who benefit from the good.
D)  supply curve must include all opportunity costs imposed on society of producing the good.

Question 12

Determining whether the burden of taxes falls on consumers, workers, or owners of other factors of production is:

Accepted Answer

A)  tax incidence analysis.
B)  government spending theory.
C)  public interest theory.
D)  public choice theory.

Question 13

It may be rational to be ignorant about an issue if the costs of being educated about it outweigh the benefits.

Accepted Answer

A) True 
 B)False

Question 14

Paying a fee every time you use the municipal golf course is an example of the:

Accepted Answer

A)  regressive tax principle.
B)  ability-to-pay principle.
C)  progressive tax principle.
D)  benefits received principle.

Question 15

The free-rider problem is most important for:

Accepted Answer

A)  public goods.
B)  private goods.
C)  market goods.
D)  both private and public goods.

Question 16

Public finance is the study of government expenditures and tax policy and their impact on the economy.

Accepted Answer

A) True 
 B)False

Question 17

Purchases or the production of goods or services by government agencies are called:

Accepted Answer

A)  government purchases.
B)  government transfers.
C)  transfer payments.
D)  public taxes.

Question 18

Public goods are efficiently provided if the price that consumers pay is:

Accepted Answer

A)  zero.
B)  less than zero.
C)  greater than zero but less than the marginal cost of production.
D)  greater than the marginal cost of production.

Question 19

The quantification of benefits and costs of activity by public officials in an effort to locate the efficient solution is characteristic of the _______ approach to studying public sector choice.

Accepted Answer

A)  federal budget studies
B)  rational abstention
C)  public interest theory
D)  public choice theory

Question 20

Taxation according to the benefits-received principle is best illustrated by the:

Accepted Answer

A)  income tax.
B)  sales tax.
C)  gift tax.
D)  gasoline tax.

Exam 15: Public Finance and Public Choice

Paying a fee every time you use the municipal golf course is an example of the:

Correct AnswerverifiedShow Answer

Reference: 15147 -(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.If the government intervenes to provide the efficient level of a public good, the net gain will be:

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The quantification of benefits and costs of activity by public officials in an effort to locate the efficient solution is characteristic of the _______ approach to studying public sector choice.

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The largest _______ transfer payment in the United States is _______ .

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Public goods are efficiently provided if the price that consumers pay is:

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A condition necessary for a market to achieve economic efficiency is that the market:

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For a public good, nonpayers _______ excluded from obtaining the benefits of the good.

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The free-rider problem is most important for:

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The study of government expenditure and tax policy and the impacts of these policies on the economy is called:

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According to public choice theory, being too busy to take the time off to vote may be the result of:

Correct AnswerverifiedShow Answer

Determining whether the burden of taxes falls on consumers, workers, or owners of other factors of production is:

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Reference: 15147 -(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.By imposing taxes to finance the public good, the government could move the production from R to the efficient level of production of :

Correct AnswerverifiedShow Answer

In the case of a public good:

Correct AnswerverifiedShow Answer

It may be rational to be ignorant about an issue if the costs of being educated about it outweigh the benefits.

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Reference: 15165 -(Exhibit: Market Failure) A competitive market, free of market failures, will achieve the equilibrium point:

Correct AnswerverifiedShow Answer

A progressive tax is one that takes:

Correct AnswerverifiedShow Answer

Paying a tax of $10 on an income of $100, a tax of $25 on an income of $200, and a tax of $60 on an income of $300 is an example of a(n) :

Correct AnswerverifiedShow Answer

Public finance is the study of government expenditures and tax policy and their impact on the economy.

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Purchases or the production of goods or services by government agencies are called:

Correct AnswerverifiedShow Answer

Taxation according to the benefits-received principle is best illustrated by the:

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The largest _ transfer payment in the United States is _ .

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