Question 1

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much __________________ percentage _______________ in growth to equal what they can get from the transfer.

Accepted Answer

The answer of Why might special interest groups be more...

Question 2

Person A argues that government is unnecessary and often does more harm than good.Economist A disagrees.What does economist A --- who believes that there is a legitimate case that can be made for government --- most likely say to support his position?

Accepted Answer

Economist A would likely argue that government is necessary to provide public goods and services that individuals cannot provide for themselves. These might include things like national defense, infrastructure, and environmental protection. While there are certainly cases where government can do harm, Economist A would argue that the benefits of government outweigh the costs.

Question 3

The federal government and many state governments gave tax credits to first-time home buyers in 2009 and 2010.An effect of these tax credits was to

Accepted Answer

The tax credits effectively increased the purchasing power of first-time home buyers, leading to an increase in demand for houses. When demand increases, prices tend to rise, assuming the supply does not increase at the same rate. Therefore, the tax credits made the price of houses higher than they would have been without the tax credit.

Question 4

To say that government sometimes functions as a "transfer mechanism," means that government sometimes

Accepted Answer

A transfer mechanism refers to the redistribution of resources or funds from one group or individual to another. Option A refers to a direct exchange of goods or services for taxes paid, which is not necessarily a transfer mechanism. Option B refers to the conversion of a negative externality into a positive one, which is not related to the redistribution of resources. Option D refers specifically to the transfer of taxes into subsidies, which is one example of a transfer mechanism but not a comprehensive definition. Option C, on the other hand, accurately captures the essence of a transfer mechanism - the taking from one group (through taxes or other means) and giving to another.

Question 5

A special interest group has a good chance of redistributing (transferring)income from others to itself if the

Accepted Answer

When the costs of the transfer are spread over a very large number of people, each individual's share of the cost is small, making it less likely that they will notice or mobilize against the transfer. This scenario facilitates the ability of a special interest group to successfully redistribute income from others to itself.

Question 6

Which of the following statements is false?

Accepted Answer

The answer of Which of the following statements is false?
...

Question 7

The strongest case for government with respect to a negative externality is that government needs to set the

Accepted Answer

In the case of a negative externality, the marginal social cost exceeds the marginal private cost. Therefore, in order to internalize the externality and encourage socially optimal levels of production and consumption, the government should impose a tax equal to the marginal external cost. This tax would increase the private cost of producing and consuming the good, bringing it closer to the social cost, and reducing the overproduction and overconsumption of the good.

Question 8

Suppose health-care reform Y makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease and sets a fine for those people who do not buy insurance.It follows that if the fine is

Accepted Answer

The answer of Suppose health-care reform Y makes it unlawful...

Question 9

The government can _______________ change an inefficient market outcome (in the case where there is a negative externality)into an efficient outcome by imposing a tax on the activity that generates the negative externality.

Accepted Answer

Imposing a tax on the activity that generates a negative externality can potentially correct the market inefficiency by internalizing the external cost, but its effectiveness depends on various factors such as the size of the tax, the elasticity of demand, and the ability to accurately measure the externality.

Question 10

Consider a setting in which there is a negative externality,but no positive externality.The market outcome is __________________;government can bring about the ___________________ outcome if it sets a tax equal to the __________________.

Accepted Answer

In a setting with a negative externality and no positive externality, the market outcome is inefficient because the cost to society (MEC) is greater than the private cost (MPC) for the producer. To bring about an efficient outcome, the government can set a tax equal to the MEC, which will shift the supply curve leftward and provide an incentive for the producer to reduce the quantity and internalize the externality. Therefore, choice C is the best option.

Question 11

Consider a setting in which there is a positive externality,but no negative externality.The market outcome is __________________;government can bring about the ___________________ outcome if it sets a subsidy equal to the __________________.

Accepted Answer

In a situation with a positive externality and no negative externality, the market outcome is inefficient because the social benefits of consumption or production exceed the private benefits, leading to underconsumption or underproduction from a societal perspective. The government can correct this inefficiency and achieve an efficient outcome by setting a subsidy equal to the Marginal External Benefit (MEB), encouraging increased consumption or production to the socially optimal level.

Question 12

Government provides a nonexcludable public good that no one wants.This situation is most closely related with:

Accepted Answer

Government failure occurs when government intervention in the economy causes an inefficient allocation of resources and leads to a situation where the outcomes are not desirable, such as providing a public good that no one wants.

Question 13

Economist A believes that the case for government is a strong one,but she doesn't always say,when it comes to negative externalities,that government can turn an inefficient market outcome into an efficient outcome.Which statement is economist A most likely to make?

Accepted Answer

The answer of Economist A believes that the case for...

Question 14

A nonexcludable public good is

Accepted Answer

A nonexcludable public good is one that cannot be restricted from use by anyone, regardless of their willingness to pay for it. Examples of nonexcludable public goods include national defense, clean air, and lighthouses. Nonrivalrous in consumption means that the consumption of the good by one person does not reduce the amount available for others to consume. Therefore, the best choice is C, nonrivalrous in consumption and nonexcludable.

Question 15

Suppose health-care reform X makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease.One unintended effect of this reform is that some people

Accepted Answer

This is known as adverse selection, where individuals may opt to not purchase insurance until they need it (i.e. they are diagnosed with a preexisting condition). This can lead to an imbalance in the insurance risk pool and result in higher premiums for everyone. Choice A is possible, but it is not necessarily an unintended effect of the reform. Choice C is not necessarily a logical consequence of the reform either. Choice D is partially correct, but only option B is explicitly mentioned in the question as an unintended effect.

Question 16

"I'm not going to pay for the good if,once produced,the good cannot be denied to anyone." This statement is most relevant to

Accepted Answer

The statement is referring to the concept of nonexcludable public goods, which are goods that cannot be denied to anyone once they are produced. This is because it is not feasible to charge people for using the good or to prevent them from accessing it. Examples of nonexcludable public goods include clean air and national defense. The statement suggests that the speaker is not willing to pay for such goods because they cannot be denied to anyone, meaning that free riders could benefit without contributing to the cost of production.

Question 17

Tiffany gives $50 to Jeremy for his birthday.This is an example of a(n)

Accepted Answer

Tiffany's action of giving $50 to Jeremy for his birthday is a voluntary transfer because she chooses to give the money without any obligation. It is also considered a gift, which is a type of voluntary transfer where something is given without the expectation of receiving something in return.

Question 18

Economist B thinks that it is important to identify the condition(s)under which the case for government is strongest.With respect to the provision of nonexcludable public goods,she says

Accepted Answer

The answer of Economist B thinks that it is important...

Question 19

The answer is,"Because of the free rider problem." The question is:

Accepted Answer

The free rider problem occurs when individuals can benefit from a public good without paying for it, which leads to underproduction of the good in a market setting. As a result, the market cannot produce nonexcludable public goods efficiently.

Question 20

Individuals want nonexcludable public good X,but the market does not provide it because of the free rider problem.Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

Accepted Answer

The government can overcome the free rider problem by taxing individuals in order to fund the production or provision of nonexcludable public good X. This ensures that everyone who benefits from the public good helps pay for it, eliminating the incentive to free ride.

Quiz 24: Globalization and International Impacts on the Economy

Why might special interest groups be more likely to push for transfers instead of economic growth? The answer is because it usually takes a much ____ percentage _ in growth to equal what they can get from the transfer.