Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
3. Which of the following best meets the criteria of a public
good?
A. A phone card.
B. An airline ticket.
C. National defense.
D. A college education.
E. A restaurant.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
3. Which of the following best meets the criteria of a public
good?
A. A phone card.
B. An airline ticket.
C. National defense.
D. A college education.
E. A restaurant.
Public Good: Must meet the
criterion of shared consumption and
nonexclusion.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
6. In a market economy, the distribution of income is:
A. equitable because people who are willing to work earn
income.
B. primarily determined by the prices of scarce resources
people
own.
C. primarily determined by the government through its
power to
tax.
D. distributed on the basis of need.
E. always more equal than in a command economy.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
6. In a market economy, the distribution of income is:
A. equitable because people who are willing to work earn income.
B. primarily determined by the prices of scarce resources people
own.
C. primarily determined by the government through its power to
tax.
D. distributed on the basis of need.
E. always more equal than in a command economy.
PURE MARKET ECONOMY: An economy in which markets answer all allocation
decisions and answers all three questions of allocation. There is no
government. Markets do it all. This is a theoretical ideal or extreme that does
not exist in the real world. As a theoretical ideal, though, it does provide a
benchmark that can be used for comparison with real world economic
systems.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
17. Which of the following statements would advocates of
public-choice theory agree?
I. Government leaders usually consider the public interest
over special interests.
II.Because of the median-voter hypothesis, there is not much
difference in the views of candidates running for office.
III.Most voters are well informed about candidates for office
A. I only
B. II only
C. III only
D. II and III only
E. I, II, and III
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
17. Which of the following statements would advocates of public-choice
theory agree?
I. Government leaders usually consider the public interest over special
interests.
II. Because of the median-voter hypothesis, there is not much difference
in the views of candidates running for office.
III.Most voters are well informed about candidates for office
A.
B.
C.
D.
E.
Public choice theory tries to look at the economic
I only
analysis of human behavior as individuals and transfers
II only
this analysis to political science.
III only
What public choice theory looks at are cases where that
II and III only individual interest leads to decisions and the allocation
of resources which may not be the most efficient
I, II, and III
allocation. This is called 'government failure'.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
18. Government may attempt to reduce income inequality by
doing which of the following?
I. Provide transfer payments to the poor
II.Directly influence market prices, such as establishing a
minimum wage
III.Tax high income earners at a higher rate than low-income
earners
A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
18. Government may attempt to reduce income inequality by doing
which of the following?
I. Provide transfer payments to the poor
II. Directly influence market prices, such as establishing a minimum
wage
III.Tax high income earners at a higher rate than low-income earners
A. I only
B. II only
C. III only
D. I and II only
E. I, II, and III
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
25. If the government increases the amount of government
insurance on bank deposits, this action would
A. Increase the probability of adverse selection
B. Lessen the probability of adverse selection
C. Increase the probability of a moral hazard problem
D. Lessen the probability of a moral hazard problem
E. Eliminate the probability of adverse selection or moral hazard
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
25. If the government increases the amount of government
insurance on bank deposits, this action would
A. Increase the probability of adverse selection
B. Lessen the probability of adverse selection
C. Increase the probability of a moral hazard problem
D. Lessen the probability of a moral hazard problem
E. Eliminate the probability of adverse selection or moral hazard
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
Short
2. Use a supply and demand graph to illustrate a negative
externality. Explain your graph.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
2. Use a supply and demand graph to illustrate a negative
externality. Explain your graph.
Short
The correct output for society is Q1. However, because of externalities, the
actual output is Q and the price is P. Taxing the emissions would decrease
supply from S to S1. This would increase the price and reduce the output to
the level where all externalities would be internalized. Without considering
the negative externalities, the price is too low and the output is too high for
an efficient allocation of resources.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
3. Use a supply and demand graph to illustrate a positive
externality. Explain your graph.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
3. Use a supply and demand graph to illustrate a positive
externality. Explain your graph.
Because the positive externalities are not considered, the
demand based on buyer benefits is only D. If societal benefits
were considered, the demand would be greater, shifting to D1.
Without considering external benefits, both price and output
are too low for an efficient allocation of resources.
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5
Mr.
Weiss
APE/Honors Economics – Test Study Questions – Micro – Unit 5