Navigation » List of Schools » Prince George Community College » Economics » Econ 1030 – Principles of Microeconomics » Summer 2021 » Test 2
Below are the questions for the exam with the choices of answers:
Question #1
A Social Security.
B Medicare.
C national defense.
D unemployment insurance.
Question #2
A voters wanting government programs but not wanting to pay taxes.
B inappropriate monetary policy.
C unfunded liabilities.
D state budget laws.
Question #3
A chronic budget deficits.
B chronic budget deficits, misdirection of stabilization policy, and unfunded liabilities.
C misdirection of stabilization policy.; and, unfunded liabilities.
Question #4
A rent-seeking behavior.
B moral hazard.
C the principal-agent problem.
D logrolling.
Question #5
A special-interest effect.
B pressure by special-interest groups.
C bureaucratic inefficiency.
D extensive positive externalities from public and quasi-public goods.
Question #6
A is easy to monitor because of the small size and scope of government.
B tends to be greater than in private firms, making government more efficient than private firms.
C tends to be lacking because of civil service protections and the complexity of government.
D is not a problem because government bureaucrats are not affected by the self-interest that affects private sector individuals.
Question #7
A enhance government’s ability make effective decisions quickly.
B improve accountability of government officials, thus leading to more efficient policies.
C lead to economic inefficiencies because of difficulty aggregating and conveying information.
D better allow the invisible hand to direct government resources to their best uses.
Question #8
A Coercing all firms to innovate and invest.
B Taxing polluters and subsidizing firms that are creating significant positive externalities.
C Promising to cover every risk of loss for private firms.
D Weakening enforcement of laws and contracts.
Question #9
A Private economic activities create externalities; government activities do not.
B Government has the legal right to force people to do things; private firms do not.
C Private firms face the constraint of scarcity; government does not.
D Government focuses primarily on equity; private firms focus only on efficiency.
Question #10
A their production seriously distorts the distribution of income.
B private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.
C there is no need or demand for such goods.
D public enterprises can produce such goods at lower cost than can private enterprises.
Question #11
A A weather warning system.
B A sofa.
C A television set.
D A bottle of soda.
Question #12
A nonexcludability and production at rising marginal cost.
B nonrivalry and nonexcludability.
C nonrivalry and large negative externalities.
D production at constant marginal cost and rising demand.
Question #13
A Supply-side market failure.
B Positive externality.
C Demand-side market failure.
D Demand-side market failure, supply-side market failure and positive externality.
Question #14
A generates more of a benefit than it costs to produce.
B costs more to produce than it provides in benefits.
C maximizes the net benefit to society.
D produces a benefit exactly equal to the cost of producing the last unit.
Question #15
A government failure.
B demand-side market failure.
C negative externality.
D supply-side market failure.
Question #16
A Negative externalities.
B Public goods.
C Negative externalities, positive externalities, and public goods.
D Positive externalities.
Question #17
A government intervenes in the functioning of private markets.
B some consumers who want a good do not obtain it because the price is higher than they are willing to pay.
C prices rise.
D private markets do not allocate resources in the most economically desirable way.
Question #18
A The sum of producer and consumer surplus is zero.
B The sum of producer and consumer surplus has been maximized
C Producer surplus has been maximized and consumer surplus has been minimized
D Consumer surplus has been mazimized and producer surplus has been minimized.
Question #19
A Deadweight loss
B Deadweight gain
C Producer surplus
D Consumer surplus
Question #20
A If it is too high, it will cause fewer workers to be demanded.
B It will decrease production costs and ultimately make the price of the product they produce too low.
C It will cause too many workers to be demanded.
D All of the above are valid arguments against the minimum wage.
Question #21
A FALSE
B TRUE
Question #22
A Household’s income and wealth.
B Consumers’ expectations about their income, wealth and/or the price of the item
C The price of the item
D Changes in the price of a substitute or complement
Question #23
A A price ceiling on gasoline, set below its current equilibrium price, would assure that everyone would be able to buy gasoline at an affordable price.
B Rent control is an example of a price floor.
C A price ceiling on some item, set below its equilibrium price, creates rationing problems.
D A price floor for a resource, such as the minimum wage, set above its equilibrium price, would increase the demand for that resource.
Question #24
A A price ceiling set above the equilibrium price, in a particular market, will cause a surplus.
B A price floor set above the equilibrium price, in a particular market, will have no effect on that market.
C A price ceiling set below the equilibrium price in a particular market will cause a shortage.
D A price floor set below the equilibrium price in a particular market will cause a shortage.
Question #25
A Substitution effect — that is, a price change can affect the opportunity cost of purchasing some item and your willingness to switch to (or from) another item.
B When the price of an item increases, you buy more because it is more valuable.
C Diminishing marginal utility — as you consumer more, as the result of a price decrease, the additional satisfaction received from the additional units consumed will start to go down.
D Income effect — that is, a price change can affect the amount of some item you can afford to purchase.
Question #26
A There is a direct (positive) relationship between price and quantity supplied.
B When the price of an item goes down, ceteris paribus, the quantity supplied will go down, but the supply will not change.
C A change in the supply of an item will cause a change in its price, but a change in the price of an item will not cause a change in its supply.
D When the supply curve for an item shifts to the right, ceteris paribus, it will cause the price of that item to go up.