Macroeconomics Private and Public Choice 16th Edition by James D. Gwartney - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below 1. The idea that an action should be undertaken if and only if the benefits exceed the costs is known as the concept of …
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Macroeconomics Private and Public Choice 16th Edition by James D. Gwartney – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
1. The idea that an action should be undertaken if and only if the benefits exceed the costs is known as the concept of
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2. When economists say that an activity meets the criterion for economic efficiency, they mean
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3. If an economic action generates more costs than benefits, the action
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4. The standard economists use to assess whether an activity should be undertaken is
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5. If the construction of a new elementary school would create $5 million worth of benefits for citizens and cost $7 million to construct, then using the criterion of economic efficiency, the school
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1. Because the benefits derived from an activity decline as it is expanded, it is generally
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2. Which of the following best explains why making automobiles completely safe is not efficient?
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3. Economic efficiency indicates that
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4. Which of the following best explains why making air travel completely safe is not efficient?
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5. Which of the following is most consistent with the idea that if it’s worth doing, it’s worth doing imperfectly?
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6. As more and more resources are dedicated to an activity
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7. Because the benefits derived from an activity decline as it is expanded, it is generally wise to
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1. There is substantial agreement among scholars that at least two functions of government are legitimate. These two functions are the
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2. The maintenance of a framework of security and order through the establishment and enforcement of rules under which people can interact peacefully with one another and be secure in their person and property is known as the
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3. Government provision of goods and services that cannot easily be provided through markets because it is difficult to establish a one-to-one link between payment and consumption of the good is referred to as the
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4. Which of the following would be a protective function of government?
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1. Markets fail to allocate resources efficiently when
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2. A market transaction causes an externality if someone
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3. Many external costs occur because
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4. The key explanation for the prevalence of waterway pollution is
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5. Relative to a competitive situation, if a market lacks competition, economic theory suggests that
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6. If a group of sellers that can restrict entry into a market, they will often be able to enlarge their total profit by
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7. When competitive forces in an industry are weak,
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8. In a market that lacks sufficient competition,
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9. Sellers have a strong incentive to lobby government for legal restrictions that would reduce the intensity of competition in their market because
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10. The spillover effects of actions that affect the well-being of nonconsenting third parties are called
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11. When externalities are present,
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12. Externalities cause the market mechanism to allocate goods and resources inefficiently because
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13. Externalities are fundamentally the result of
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14. If pollutants emitted by firms in the steel industry increase, but there is no increase in the costs borne by these firms, you could conclude that
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15. Suppose that an MBA degree creates no externality because the benefits of an MBA are captured by the student in the form of higher wages. If the government offers subsidies for MBAs, then which of the following statements is correct?
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16. When a nuclear-powered electrical plant is permitted to dump radioactive waste at no cost into a recreational waterway lowering the value boaters receive from the waterway, the
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17. If production of a good creates external benefits, a competitive market will likely produce
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18. When a firm generates external benefits, a more efficient outcome would result if
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19. If in market equilibrium the true marginal cost of producing a good exceeds the marginal cost incurred by the firm,
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20. Markets fail when externalities are present
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21. A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?
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22. If consumption of education creates an external benefit, then in order to increase efficiency relative to the outcome determined by private decisions,
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23. If education creates external benefits,
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24. When production of a good provides external benefits, there will be
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25. As a general rule, if pollution costs are external, firms will produce
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26. If government taxes a firm which pollutes this will
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27. Suppose the actions of the producers of a good impose an external cost which results in the actual market price of $18 and market output of 400 units. How does this outcome compare to the efficient, ideal equilibrium?
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28. Suppose the actions of the producers of a good generate an external benefit which results in the actual market price of $30 and market output of 220 units. How does this outcome compare to the efficient, ideal equilibrium?
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29. Consider two goods – one that generates external benefits and another that generates external costs. The actual market outcome would
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30. Suppose external costs are present in a market which results in the actual market price of $24 and market output of 325 units. How does this outcome compare to the efficient, ideal equilibrium?
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31. Suppose external benefits are present in a market which results in the actual market price of $14 and market output of 150 units. How does this outcome compare to the efficient, ideal equilibrium?
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32. Consider two goods–one that generates external costs and another that generates external benefits. The actual market outcome would
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33. Suppose external costs are present in a market which results in the actual market price of $70 and market output of 150 units. How does this outcome compare to the efficient, ideal equilibrium?
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34. Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?
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35. When external costs are present in a market,
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36. In a competitive market, if the production process involves an external cost, such as pollution of the environment, the market will
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37. Suppose the firms in the chemical industry are allowed, free of charge, to dump harmful products into rivers. How will the price and output of the chemical products in a competitive market compare with their values under conditions of ideal economic efficiency?
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38. When external benefits are present in a market,
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39. In a competitive market, if the production process involves an external benefit, the market will
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40. Consider two goods–one that generates external benefits and another that generates external costs. A competitive market economy would tend to produce
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41. A good is considered to be a public good if it
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42. Students in a class are assigned to groups to work on a project. A grade will be given for each project, and everyone in the group will receive that grade. For the members of a particular group, the grade is a
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43. What are the two distinguishing characteristics of a public good?
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44. A good that is both nonexcludable and nonrival-in-consumption is called a
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45. A good for which it is impossible or at least very costly to exclude nonpaying customers from receiving the good and for which many individuals can share in the consumption of the same unit of the good is called a
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46. A good is considered nonrival-in-consumption if
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47. A free-rider problem exists when a good that has the following characteristic?
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48. Because of the free-rider problem,
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49. When the free-rider problem exists,
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50. The government sometimes provides public goods because
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51. The government sometimes provides public goods because
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52. If the consumption of a good by one individual does not change the amount of the good available to others, the good is considered to be
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53. How does an additional individual’s consumption of a good that is nonrival-in-consumption, such as a radio broadcast, affect the amount of the good available to other consumers?
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54. A good is considered nonexcludable if
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55. If it is impossible or very costly to exclude nonpaying customers from receiving a good, the good is considered to be
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56. When a good is nonexcludable,
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57. People who receive the benefit of a good without contributing to its costs of production are called
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58. In economics, a free rider is the term used for a person who
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59. A college has found that during every home football game, a group of students sits on a hillside next to the stadium and watches the game without purchasing tickets. In economics, the problem that this college is facing is referred to as a
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60. Which of the following about public goods is true?
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61. From the standpoint of economic efficiency, markets tend to provide
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62. A market is unlikely to provide an efficient quantity of public goods because
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63. Which of the following is a valid reason for government provision rather than market provision of certain economic goods and services?
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64. A car sells at different prices at different dealerships in a local market. If a consumer has imperfect information about the price of a car at each dealership, he should
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65. Sellers will tend to be most concerned with customer satisfaction when
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66. Which of the following statements is true regarding potential information problems faced by consumers?
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67. Which of the following most clearly indicates why the franchiser of a product has a strong incentive to monitor the quality of the product among all of the franchised sellers?
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68. When consumers cannot tell the difference at the time of sale between high-quality products and those with defects, strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market. Economists call this
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69. Manny’s Bar-n-Grill is next door to a franchised fast-food restaurant near a busy freeway exit. Essentially, the menus, food quality, atmosphere, and service are equal at the two restaurants. Nevertheless, the nationally franchised restaurant can attract more customers, even though its prices are higher. This situation
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70. Market failure will most likely arise from poor information when the product is
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71. An item purchased often by the same buyer is known as a
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72. Brand names such as “Coca Cola” or “Nike”
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73. Which of the following is a true statement regarding why the government produces public goods?
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74. Suppose that the producers of copper are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of copper products in a competitive market compare with their values under conditions of ideal economic efficiency?
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75. Which of the following provides an example of an externality?
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76. Which of the following provides the best example of a public good?
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77. Which of the following is true of public goods?
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78. Markets provide the efficient amount of a good or service when
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79. The “free rider problem” occurs in connection with
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1. When market failure is present,
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2. A sound legal system that protects individuals and their property,
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3. When there is reason to think that the existing structure of incentives will cause individuals in the market to act in ways that are inconsistent with ideal economic efficiency, economists say that
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4. The economic way of thinking indicates that government action will
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5. “Government failure” exists when political decision-makers choose actions that
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6. “Government failure” is present when
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7. Economic analysis indicates that
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8. Government failure is present when
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9. When government failure is present,
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10. Which of the following provides the most accurate explanation of what is meant by “government failure”?
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1. National defense is considered a public good because there appears to be no limits to the nonrivalry-in-consumption characteristic, and exclusion of nonpayers is impossible. Are there any other goods that so perfectly meet both public goods criteria?
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2. After spending $400,000 to build your dream home, you recently discovered that after less than one year the foundation is cracking. Further investigation reveals that the contractor used substandard concrete. Is there a role for the public sector in this situation?
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3. How does the text define economic efficiency? Is this an absolute or a relative definition? Would another type of definition be preferable? Why or why not?
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4. Sam lives next to The Party Pub and its outdoor “beer garden” that features live music. An economics major, Sam considers this a positive externality. Dave, another economics student, lives next to The Party Pub too, but he considers the music a negative externality. Which student, if either, is correct? Why?
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5. Is your economics textbook a public or private good? If you conclude that it is a private good, why do we have copyright laws?
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6. Is education a public good? Focus on whether it meets the two criteria for being a public good.
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7. Why is a stable monetary system essential for the smooth operation of a market system? What would an unstable monetary system be like? Why isn’t a barter economy just as efficient as an economy with money?
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8. A hilly, public golf course is often used by sledders in the winter. One of the sledders was quoted as saying, “This is public property, so we have just as much a right to be on these hills as anyone else. Besides, when it snows, golfers can’t use the course anyway. Sledding doesn’t harm anything.” Is he correct? Why or why not?
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9. Anne has just purchased a new house in a lovely neighborhood. Her neighbors are friendly and even brought her house-warming gifts. Anne, however, has a problem. Her neighbors have cats, and Anne hates cats. Even though the city has a law requiring all outdoor pets to be on a leash, her neighbors ignore it, and the cats roam all over Anne’s property. How would an economist describe this situation? Is there anything Anne can do?
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10. Sparkle-Bright toothpaste is a new product that advertises it will give you fresh breath and shiny, white teeth. You buy a tube for $1.99, and after brushing, you have both bad breath and dull teeth. Is there a role for the public sector in this situation?
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| Figure 5-1 |
1. In Figure 5-1, S1 and D illustrate the demand and supply for a product if it were produced in a normal competitive market. Which of the following would be true if the firms in the industry were instead able to get government licensing restrictions to limit competition in the market?
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| Use the figure below to answer the following question(s).
Figure 5-2 |
2. Figure 5-2 illustrates the market for a product that generates an external cost. S1 is the private market supply curve, while S2 is the supply curve including the external cost. Which of the following is true?
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3. Figure 5-2 illustrates the market for a product that generates an external cost. S1 is the private market supply curve, while S2 is the supply curve including the external cost. Which of the following is true?
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| Use the figure below to answer the following question(s).
Figure 5-3 |
4. Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true?
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5. Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true?
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| Figure 5-4 |
6. Refer to Figure 5-4. The figure illustrates an industry that generates
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7. Refer to Figure 5-4. The inefficient equilibrium price and quantity are
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8. Refer to Figure 5-4. The efficient price and quantity are
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9. Refer to Figure 5-4. If the government uses a pollution tax, how much of a tax must be imposed on each unit of production?
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1. Which of the following is the most fundamental function of government?
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2. Competitive markets generally give consumers and producers correct incentives when
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3. Economic efficiency requires that
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4. When production of a good generates external costs, the
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5. From the viewpoint of economic efficiency, when competitive forces in an industry are weak, market allocation will often lead to
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6. Which of the following correctly describes the external benefit resulting from an individual’s purchase of a winter flu shot?
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7. Which of the following is the best example of a public good?
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8. Markets may have difficulty providing the proper quantity of a public good because
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9. Suppose paper pulp mills are permitted to emit harmful pollutants, free of charge, into the air. How will the price and output of paper in a competitive market compare with their values under conditions of ideal economic efficiency?
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10. Which of the following is a source of information that helps consumers acquire information about the quality of a good or service?
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Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
