Deck 1: Fundamental Principles of Public Finance

Question 1

Bain Educational operates an elementary school in Big Bucks, Kansas. It is open to any student in the local school district and the school is financed by a property tax levied by the local school district. This represents an example of:

A) public provision and public production
B) public provision and private production
C) private provision and private production
D) private provision and public production

Answer 1

public provision and private production

Question 2

If a good is characterized by easy exclusion but many may concurrently use it without reducing the amount available for others, the good is a:

A) private gooD)
B) common property resource.
C) toll gooD)
D) public gooD)

Answer 2

toll good

Question 3

Which is not a reason for privatizing government services?

A) To increase production efficiency.
B) To improve service to the publiC)
C) To raise cash.
D) All of the above are reasons to privatize.

Answer 3

All of the above are reasons to privatize

Question 4

A public project produces the following pattern of individual benefits and costs for the people influenced by the project.
The project:

A) passes the Pareto criterion but is not economically feasible.
B) would pass a majority vote but not the Pareto criterion.
C) passes the criterion of economic feasibility, but would not pass majority vote.
D) passes the pareto criterion but would not pass a majority vote.

Question 5

Which of the following would be described as a common pool resource?

A) A can of soda
B) An aquifer
C) National defense
D) A movie theatre

Question 6

Toll goods are characterized by:

A) joint use and exclusion not feasible.
B) alternate or competitive) use and exclusion not feasible.
C) joint use and exclusion feasible.
D) alternate or competitive) use and exclusion feasible.

Question 7

Which of the following is an application of the principle of moral hazard?

A) People build homes in areas subject to severe flood damage when federally-subsidized insurance is available.
B) Inappropriate lyrics are available for downloading through the Internet when regulations are not enforceD)
C) Actions by one individual have an impact on innocent bystanders.
D) None of the above.

Question 8

Which of the following arguments is based on the concept of adverse selection?

A) The U.S. Military needs higher pay to attract the best personnel.
B) Private medical insurance companies seek to exclude those most likely to need healthcare.
C) Only the national government can successfully conduct macroeconomic stabilization policies.
D) Mosquito abatement is a public gooD)

Question 9

Logrolling is the process where:

A) one legislator trades his/her vote on one issue in exchange for the vote of another legislator on a second issue.
B) campaign contributions are used to secure a legislator's vote on a particular issue.
C) media campaigns are initiated by special interest groups to sway public opinion and subsequently legislators votes on issues.
D) unrelated amendments are attached to pending legislation to secure its passage.

Question 10

Non-appropriability consists of the following two aspects:

A) nonsubsidization and nondistribution.
B) nonexclusion and nonexhaustion.
C) taxing and spending.
D) none of the above.