Market Failure and the Role of Government

Market Failure and the Role of Government
Order 5980213
Market Failure and the Role of Government
1. A private business will not produce a good like a public radio
station, because
(A) MC is greater than MB
(B) there is zero profit for this good
(C) the government owns a monopoly for this type of service
(D) the free-rider problem
(E) all of the above
2. The idea that taxes and a person’s income should vary directly is
known as
(A) the marginal propensity to consume
(B) the marginal propensity to save
(C) the free-rider problem
(D) the ability to pay principle of taxation
(E) marginal cost
3. The reason a general sales tax is regressive is because
(A) low-income families pay a higher portion of their income than
high-income families do
(B) the tax is paid for by the seller, not the buyer
(C) the tax is paid for by the buyer, not the seller
(D) low-income families pay less of the tax than households with
higher income do
(E) tax rates do not vary as compared to income
4. The fact that a firefighter’s job is more dangerous than a college
professor’s job is an example of
(A) compensating differential
(B) a negative externality
(C) the free-rider problem
(D) the ability to pay principle
(E) the benefits received principle
Market Failure and the Role of Government
5. All of the following are examples of compensating differential
EXCEPT
(A) a teaching assistant earning less than a sanitation worker
(B) a worker with 15 years’ experience making more than a worker
with 2 years’ experience in the same field
(C) an airline pilot earning less than a neurologist
(D) a principal earning more than a substitute teacher
(E) A and B are viable examples
6. Of the following, which is a public good?
(A) a limousine
(B) tickets to a baseball game
(C) a subscription to the New York Times
(D) a radio station
(E) a bowl of ice cream
7. A “flat tax” is also known as
(A) ability to pay tax
(B) benefits received tax
(C) proportional tax
(D) income tax
(E) property tax
8. Industrialized nations often produce negative externalities in the
form of pollution. What is a possible solution to fix this negative
externality?
(A) A tax on consumers
(B) A government subsidy for consumers
(C) A government subsidy for producers
(D) A tax on producers
(E) A flat tax on both producers and consumers
Market Failure and the Role of Government
9. Last year Anna earned $50,000 in gross income and paid $10,000 in
taxes. She recently received a promotion. So next year she will earn
$75,000 in gross income and pay $15,000 in taxes. This increase in
taxes is a result of
(A) a regressive tax
(B) a progressive tax
(C) a proportional tax
(D) an ability to pay tax
(E) none of the above
10. The fire department is an example of a(n)
(A) private good
(B) inferior good
(C) normal good
(D) public good
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