Question 1

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 2

If public goods were marketed like private goods,then

Accepted Answer

A)  Public goods would be overproduced.
B)  There would be market failure.
C)  The optimal mix of output would occur at the market equilibrium.
D)  The economy would be outside the production possibilities curve.

Question 3

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 4

Sometimes the response to price signals,rather than the signals themselves,may be flawed.
The market may fail even when the price signals are accurate.The response to price signals,rather than the signals themselves,may be flawed.For example,there may be externalities present.

Accepted Answer

A) True 
 B)False

Question 5

Approximately what percentage of state and local expenditures do bond referenda account for?

Accepted Answer

A)  1 percent.
B)  10 percent.
C)  25 percent.
D)  50 percent.

Question 6

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 7

The optimal mix of output is the most desirable combination of output attainable with existing

Accepted Answer

A)  Resources and products.
B)  Resources,technology,and social values.
C)  Resources,government regulations,and technology.
D)  Technology and business decisions.

Question 8

Which of the following is the best example of a government effort to address market failure in relation to the FOR WHOM to produce question?

Accepted Answer

A)  Antitrust policy.
B)  Regulations reducing pollution.
C)  Transfer payments.
D)  The production of goods that allow free riders.

Question 9

An externality affecting supply can be measured graphically as the

Accepted Answer

A)  Horizontal distance between the market demand curve and the social demand curve.
B)  Vertical distance between the market demand curve and the social demand curve.
C)  Horizontal distance between the market supply curve and the social supply curve.
D)  Vertical distance between the market supply curve and the social supply curve.

Question 10

The largest single source of revenue for the federal government is

Accepted Answer

A)  Excise taxes.
B)  Corporate income taxes.
C)  Social Security payroll taxes.
D)  Personal income taxes.

Question 11

The government's role in limiting smoking in many buildings is justified by considerations of

Accepted Answer

A)  Inequity.
B)  Externalities.
C)  Market power.
D)  Government failure.

Question 12

Which of the following explains why flood control is a public good?

Accepted Answer

A)  There are external benefits associated with its consumption.
B)  The private sector usually produces flood control projects.
C)  It is not divisible and therefore cannot be kept from people who do not pay.
D)  Flood control is paid for by taxpayers.

Question 13

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 14

Suppose that if your income is $50,000,your tax is $5,000,but if your income is $100,000,your tax is $8,000.Such a tax is

Accepted Answer

A)  Regressive.
B)  Progressive.
C)  Proportional.
D)  An excise tax.

Question 15

From an economic standpoint,government intervention is justified

Accepted Answer

A)  When the market mechanism fails to achieve the optimal mix of output.
B)  Because the government will encourage the production of private goods.
C)  Because the government can increase the level of market power of private businesses.
D)  When the private sector is larger than public sector.

Question 16

A monopoly occurs when

Accepted Answer

A)  A firm gains some level of market power.
B)  A firm charges a price greater than the equilibrium price.
C)  There is only one producer of a particular good or service.
D)  There is an underproduction of a good or service by a firm.

Question 17

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 18

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 19

Income transfers directly alter the mix of output and answer the question of WHAT is produced question.
Income transfer programs do not change the mix of output; they change FOR WHOM it is produced.

Accepted Answer

A) True 
 B)False

Question 20

The term transfer payments refers to

Accepted Answer

A)  Federal income taxes.
B)  Money that is transferred between savings and checking accounts.
C)  Payments to individuals that are not in exchange for current goods and services being produced.
D)  Additional profits transferred to monopolies as a result of their market power.

Exam 4: The Role of Government

Income transfers directly alter the mix of output and answer the question of WHAT is produced question. Income transfer programs do not change the mix of output; they change FOR WHOM it is produced.

Correct AnswerverifiedShow Answer

The market will overproduce goods that have external costs because

Correct AnswerverifiedShow Answer

Sometimes the response to price signals,rather than the signals themselves,may be flawed. The market may fail even when the price signals are accurate.The response to price signals,rather than the signals themselves,may be flawed.For example,there may be externalities present.

Correct AnswerverifiedShow Answer

The government's role in limiting smoking in many buildings is justified by considerations of

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

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

Correct AnswerverifiedShow Answer

From an economic standpoint,government intervention is justified

Correct AnswerverifiedShow Answer

An externality affecting supply can be measured graphically as the

Correct AnswerverifiedShow Answer

Suppose that if your income is $50,000,your tax is $5,000,but if your income is $100,000,your tax is $8,000.Such a tax is

Correct AnswerverifiedShow Answer

The term transfer payments refers to

Correct AnswerverifiedShow Answer

A monopoly occurs when

Correct AnswerverifiedShow Answer

Which of the following is the best example of a government effort to address market failure in relation to the FOR WHOM to produce question?

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 Social Security tax is

Correct AnswerverifiedShow Answer

If public goods were marketed like private goods,then

Correct AnswerverifiedShow Answer

Which of the following explains why flood control is a public good?

Correct AnswerverifiedShow Answer

Approximately what percentage of state and local expenditures do bond referenda account for?

Correct AnswerverifiedShow Answer

The largest single source of revenue for the federal government is

Correct AnswerverifiedShow Answer

The optimal mix of output is the most desirable combination of output attainable with existing

Correct AnswerverifiedShow Answer

A merit good is

Correct AnswerverifiedShow Answer

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