Below are the 33 questions on the quiz Which of the following statements is true?

QUESTION

Below are the 33 questions on the quiz

Which of the following statements is true?

a	A market failure occurs when the market produces the “wrong” amount of a good or service, or fails to provide any at all.
b	When there is market failure, resources are either over-allocated or under-allocated to the production of the good.
c	Supply-side market failures occur when it is impossible to charge all consumers, or even any consumer of the good, the price for the good. As a result, firms are not willing to produce the good since they cannot cover the cost of production.
d	All of the above.
e	Only a) and b)

Question 2 (1 point)

Which of the following statements is true?

a	A demand-side market failure occurs when a firm does not pay the full cost of producing its output (which includes “extra” costs). That is, the external (“extra”) costs of producing the good are not reflected in the supply of the good.
b	When there aren’t any market failures (that is, when demand fully reflects consumers’ willingness to pay and supply reflects all costs of production), the market equilibrium is efficient.
c	An efficient market produces the amount of output that society desires, and maximizes the benefits to both consumers and producers.
d	All of the above.
e	Only b) and c)

Question 3 (1 point)

Which of the following statements is true?

a	Producer surplus is the difference between what a consumer is willing to pay for a good and what the consumer actually pays. It is the “extra” benefit from paying less than the maximum price one is willing to pay for the good.
b	Consumer surplus is the difference between the actual price a producer receives for a good and the minimum price they would accept for the good. It is the “extra” benefit from receiving a higher price.
c	Private goods are produced in the market by firms, and have two key characteristics: rivalry and excludability.
d	All of the above.
e	Only a) and b)

Question 4 (1 point)

Which of the following statements is true?

a	Excludability occurs when one’s consumption of a good makes it unavailable for others, and it comes in units that are small enough to be afforded by individual buyers.
b	Rivalry occurs when those who are unable and unwilling to pay for the good do not have access to the benefits of the good.
c	Since private goods have rivalry and excludability, private, firms can produce and sell them for a profit.
d	All of the above.
e	Only a) and b)

Question 5 (1 point)

Which of the following statements is true?

a	Public goods are often supplied by the government, and have two key characteristics: nonrivalry and nonexcludability.
b	The demand for a public good may underreport how much consumers are willing and able to pay.
c	Nonexcludability occurs when one’s consumption of the good does not preclude another person from consuming the good.
d	All of the above.
e	Only a) and b)

Question 6 (1 point)

Which of the following statements is true?

a	Nonrivalry occurs when no one can be prevented from enjoying the benefits of a public good.
b	Because of nonrivalry and nonexcludability, public goods suffer from the free-rider problem, which means that many people can benefit from the good without paying for it.
c	The free-rider problem makes the production of the good unprofitable for firms, since they have no way to ensure that only-paying consumers will enjoy the good. As a result, the government often supplies public goods.
d	All of the above.
e	Only b) and c)

Question 7 (1 point)

Which of the following statements is true?

a	Examples of public goods include national defense, public music concerts, and outdoor fireworks displays.
b	Quasi-public goods are those that have large positive externalities (or spillover benefits). That is, quasi-public goods not only benefit those who pay for it but also some third party external to the market transaction.
c	The government typically sponsors the provision of quasi-public goods.
d	All of the above.
e	Only a) and b)

Question 8 (1 point)

Which of the following statements is true?

a	Quasi-public goods can be provided through the market system. However, if they were produced just in the private market, they would be underproduced.
b	Examples of quasi-public goods are education, streets, and museums.
c	The government can tax individuals and businesses, but taxes reduce their income and thus their demand for private goods. However, the government can use the tax revenues to increase the production of public goods.
d	All of the above.
e	Only a) and b)

Question 9 (1 point)

Which of the following statements is true?

a	An externality is a cost or benefit accruing to a third party external to the market transaction.
b	Negative externalities occur when a third party is affected by the transaction in a positive way.
c	In a market with positive externalities, the good is “underproduced” because people are willing to pay only for the “private” benefit and not for the “social” benefit, which is greater.
d	All of the above.
e	Only a) and c)

Question 10 (1 point)

Which of the following statements is true?

a	Since social benefits are greater than the private benefits, the government must either aid the producer to encourage more output, or engage in its own production of the good with positive externalities.
b	Positive externalities occur when a third party is affected by the transaction in a negative way.
c	In a market with positive externalities, the good is “underproduced” because the producer is not bearing the full cost of production but receiving all the benefits from the production of the good.
d	All of the above.
e	Only a) and c)

Question 11 (1 point)

Which of the following statements is true?

a	Since for goods with positive externalities social costs are greater than the private costs, the government must make the producer reduce the output of these goods.
b	The government can correct negative externalities through direct controls/regulations or specific taxes.
c	Excise taxes are those imposed on a specific good or service.
d	All of the above.
e	Only b) and c)

Question 12 (1 point)

Which of the following statements is true?

a	Negative externalities result in an underallocation of resources.
b	The government can correct positive externalities by using subsidies or by producing the good itself.
c	The Coase theorem suggests that under some conditions private bargaining can solve externality problems.
d	All of the above.
e	Only b) and c)

Question 13 (1 point)

Which of the following statements is true?

a	The cap and trade program to reduce CO2 emissions sets a cap for the total amount of emissions and assigns property rights to pollute. Only firms that have purchased permits can pollute.
b	With a cap and trade program, firms who need to pollute more have the opportunity to buy more pollution rights from other firms who don’t need to pollute as much.
c	A carbon tax is based on how much carbon each good contains. The tax works by raising the cost of polluting, and reducing the consumption and the amount of CO2 in the environment.
d	All of the above.
e	Only a) and b)

Question 14 (1 point)

Which of the following statements is true?

a	The government’s ability to force people to do things can be used to increase economic efficiency.
b	Regarding production of public goods or in the presence of positive externalities, the government can improve economic efficiency by using involuntarily collected tax money to subsidize production.
c	Regarding production in the presence of negative externalities, the government can reduce overproduction and improve economic efficiency by using involuntary policies such as direct controls, pollution taxes, and cap-and-trade schemes to force producers to bear higher costs.
d	All of the above.
e	Only a) and b)

Question 15 (1 point)

Which of the following statements is true?

a	Regarding the reduction of private-sector economic risks, the government can outlaw various forms of theft, deception and discrimination.
b	Governments don’t face any problems when trying to organize millions of employees to carry out thousands of tasks.
c	Government failure refers to economically inefficient outcomes caused by shortcomings in the public sector.
d	All of the above.
e	Only a) and c)

Question 16 (1 point)

Which of the following statements is true?

a	The Principal-agent problem refers to conflicts that arise when tasks are delegated by one group of people (agents) to another group (principal).
b	Special-interest effect refers to any outcome of the political process whereby a small number of people obtain a government program or policy that gives them large gains at the expense of a much greater number of persons who individually suffer small losses.
c	The appeal to government for special benefits at taxpayers’ expense is called rent-seeking.
d	All of the above.
e	Only b) and c)

Question 17 (1 point)

Which of the following statements is true?

a	A government creates an unfunded liability when it commits to making a series of future expenditures without simultaneously committing to collect enough tax revenues to pay for those expenditures.
b	The government collects Social Security taxes to help defray the expected future costs of the program (Social Security and Medicare), but the current tax rates will not generate nearly enough revenue to pay for all of the expected outlays.
c	A government runs an annual budget deficit when its spending is less than its tax revenues during a particular year.
d	All of the above.
e	Only a) and b)

Question 18 (1 point)

Which of the following statements is true?

a	To make up for the shortfall of tax revenues over its spending, the government must borrow money.
b	Chronic deficits make the government debt grow very slowly.
c	Many state and local governments have balanced-budget laws to make deficits illegal. But no such law exists in the US at the national level.
d	All of the above.
e	Only a) and c)

Question 19 (1 point)

Which of the following statements is true?

a	Governments often attempt to smooth out business cycles by using fiscal and monetary policies.
b	Fiscal and monetary policies are used to make the economy achieve full employment, potential output, and low inflation.
c	Fiscal policy refers to changes in taxes and spending levels aimed at exacerbating the business cycle.
d	All of the above.
e	Only a) and b)

Question 20 (1 point)

Which of the following statements is true?

a	In the US, the President, the Treasury Department and Congress conduct monetary policy.
b	Monetary policy attempts to use changes in interest rates and the money supply to regulate the economy.
c	In the US, the Federal Reserve System (The FED) conducts fiscal policy.
d	All of the above.
e	Only a) and b)

Question 21 (1 point)

Which of the following statements is true?

a	To prevent the politicization of macro policies, most countries have put politically independent central banks in charge of monetary policy.
b	Regulatory capture happens when a government agency’s regulations and enforcement activities come to be heavily influenced by the industry it is supposed to be regulating.
c	Political corruption is the unlawful misdirection of governmental resources that occurs when governmental officials abuse their entrusted powers for personal gain.
d	All of the above.
e	Only a) and b)

Question 22 (1 point)

Which of the following statements is true?

a	Business Cycle refers to fluctuations in real GDP around its long-term trend.
b	A recession is a slowdown of the overall economic activity.
c	During an expansion total output (real GDP) declines and unemployment increases.
d	All of the above.
e	Only a) and b)

Question 23 (1 point)

Which of the following statements is true?

a	The Great Recession took place between December 2006 and June 2009.
b	Real gross domestic product (Real GDP) is a measure of the quantity of final goods and services produced (for the marketplace) within the borders of a country during a specific period of time, typically a year.
c	Real GDP is calculated by taking Nominal GDP, and statistically removing from it the effects of the price changes that have occurred over time.
d	All of the above.
e	Only b) and c)

Question 24 (1 point)

Which of the following statements is true?

a	Nominal GDP measures the dollar-value of the goods and services produced in the economy during a year, at their current prices.
b	Even if the economy continues to produce the same quantity of goods and services, just because there is inflation (prices are going up) nominal GDP will decrease.
c	The unemployment rate is the percentage of the workforce that is not working but is actively looking for a job.
d	All of the above.
e	Only a) and c)

Question 25 (1 point)

Which of the following statements is true?

a	During recessions unemployment increases, and during expansions, unemployment decreases.
b	Inflation refers to decreases in the overall level of prices.
c	A high level of inflation means that it will cost the typical family more to purchase the same quantity of goods and services.
d	All of the above.
e	Only a) and c)

Question 26 (1 point)

Which of the following statements is true?

a	The inflation rate is the percentual change in the price level.
b	The price level is the average level of prices in the economy.
c	Prior to the Industrial Revolution (around 1600-1840), there was basically no increases in the standard of living around the world.
d	All of the above.
e	Only a) and b)

Question 27 (1 point)

Which of the following statements is true?

a	The standard of living in a country can be estimated using Real GDP per capita (per person)
b	By definition, Real GDP per capita = Real GDP / Population.
c	A key principle of economic growth is that in order to raise the standard of living of a country over time, an economy must devote some of its current output to increasing future output. This requires both saving and investment.
d	All of the above.
e	Only a) and b)

Question 28 (1 point)

Which of the following statements is true?

a	There is a trade-off between current and future consumption. For a country to consume more goods in the future, it must have to produce less consumption goods and produce more investment goods today.
b	More capital goods in today’s economy will help it produce more consumption goods in the future.
c	The economy saves when current consumption is greater than current output.
d	All of the above.
e	Only a) and b)

Question 29 (1 point)

Which of the following statements is true?

a	Households are the principal source of savings in the economy.
b	The economy invests when resources are devoted to increasing future output.
c	While banks and other financial institutions undertake economic investment by lending funds to firms, firms pursue financial investment when buying (new) factories, machinery and equipment.
d	All of the above.
e	Only a) and b)

Question 30 (1 point)

Which of the following statements is true?

a	No one knows what the future holds. This uncertainty complicates decisions about savings and investments.
b	Supply shocks are unexpected changes in the demand for goods and services.
c	Demand shocks are unexpected changes in the supply of goods and services.
d	All of the above.
e	Only a) and b)

Question 31 (1 point)

Which of the following statements is true?

a	If prices are flexible, the market price will be able to adjust to unexpected changes in demand. There would be no short-run fluctuations in output (that is, production levels would remain constant), and unemployment levels would remain the same.
b	In reality, many prices are inflexible and do not change rapidly in response to unexpected demand changes (prices are “sticky”). Since the price cannot change, firms must pursue other paths, such as changing production to match the demand.
c	Firms may store inventory to help with unexpected surges in demand, but this is very costly.
d	All of the above.
e	Only a) and b)

Question 32 (1 point)

Which of the following statements is true?

a	In the long-run, all prices are flexible. Firms have “enough” time to fully adjust their prices to the new market conditions.
b	In the short-run, prices are “sticky”.
c	Prices are “sticky” because firms know that consumers prefer stable prices, and firms want to avoid “price wars”.
d	All of the above.
e	Only a) and b)

Question 33 (1 point)

Which of the following statements is true?

a	Regarding the causes of a recession, Minsky believed that severe recessions are often immediately followed by large asset-price bubbles.
b	Asset-price bubbles are periods during which euphoria and debt-fueled speculation cause the price of one or more financial assets to irrationally skyrocket before collapsing down to more realistic levels.
c	Economists of the so-called Austrian School also blame bubbles for severe recessions, but they put the blame for bubbles on government actions that, they say, keep interest rates too low for too long.
d	All of the above.
e	Only b) and c)

ANSWER