Unlike a private good, a public good

has benefits available to all, including nonpayers.

The two main characteristics of a public good are

nonrivalry and nonexcludability.

As it relates to the political process, the principal-agent problem results from the

dif between voters' interest in programs & politicians' want for reelection

In which of the following cases will total revenue increase?

Price rises and demand is inelastic.

Which goods will most likely suffer a decline in demand during a recession? (Elasticity in parentheses)

plasma screen and LCD TVs (+4.2)

The price elasticity of demand coefficient measures

buyer responsiveness to price changes.

An antidrug policy that reduces the supply of heroin might

increase street crime b/c addict's demand for heroin is highly inelastic.

It takes a considerable amount of time to increase the production of pork. This implies that

the SR supply curve for pork is less elastic than the LR supply curve .

A perfectly inelastic demand curve

graphs as a line parallel to the vertical axis.

Public choice theory focuses on the economics of

government decision making, politics, and elections.

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Exam 3 - Chapters 5 & 6

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Questions 20

Answers

1
If demand for a product is elastic, the value of the price elasticity coefficient is
zero
less than one.
greater than one.
equal to one.
2
Unlike a private good, a public good
has no opportunity costs.
has benefits available to all, including nonpayers.
produces no positive or negative externalities.
is characterized by rivalry and excludability.
3
The two main characteristics of a public good are
nonexcludability and production at rising marginal cost.
nonrivalry and nonexcludability.
production at constant marginal cost and rising demand.
nonrivalry and large negative externalities.
4
As it relates to the political process, the principal-agent problem results from the
dif between voters' interest in programs & politicians' want for reelection
political rules encouraging officials to do unethical and illegal things.
negative externalities that are created by some policy actions.
paradox of voting.
5
If a college admits only a fixed number of applicants every year, then the school's supply curve for admissions is
perfectly elastic.
quite flat.
perfectly inelastic.
downward-sloping.
6
Gigantic State University raises tuition to raise revenue so more faculty can be hired. GSU is assuming demand is:
perfectly elastic.
relatively inelastic.
relatively elastic.
decreasing.
7
In which of the following cases will total revenue increase?
Price rises and demand is inelastic.
Price falls and supply is elastic.
Price falls and demand is inelastic.
Price rises and demand is elastic.
8
Which goods will most likely suffer a decline in demand during a recession? (Elasticity in parentheses)
chicken purchased at the grocery store for preparation at home (+0.25)
dinner at a nice restaurant (+1.8)
second-hand clothing (-0.6)
plasma screen and LCD TVs (+4.2)
9
Toll-free roads sometimes get congested, such as during rush-hour traffic. We would say that these roads are
excludable and rival.
excludable and nonrival.
nonexcludable and rival.
nonexcludable and nonrival.
10
The price elasticity of demand coefficient measures
how far business executives can stretch their fixed costs.
buyer responsiveness to price changes.
the extent to which a demand curve shifts as incomes change.
the slope of the demand curve.
11
An antidrug policy that reduces the supply of heroin might
reduce street crime b/c the addict's demand for heroin is highly inelastic.
reduce street crime b/c the addict's demand for heroin is highly elastic.
increase street crime b/c addict's demand for heroin is highly inelastic.
increase street crime b/c the addict's demand for heroin is highly elastic.
12
It takes a considerable amount of time to increase the production of pork. This implies that
an increase in demand for pork will cause larger response in the short run
a change in the demand for pork will not affect its price in the short run.
the LR supply curve for pork is less elastic than the SR supply curve.
the SR supply curve for pork is less elastic than the LR supply curve .
13
The trading of votes to secure favorable outcomes on decisions that would otherwise be defeated is called
the special-interest effect.
median-voter trading.
the paradox of voting.
political logrolling.
14
In the corporate world of business, the principal-agent problem arises between
managers and stockholders.
stockholders and bondholders.
workers and managers.
corporations and their banks.
15
Economists call the pursuit of extra profit or income by influencing government policies,
the paradox of voting.
adverse selection.
the benefits-received principle.
rent-seeking behavior.
16
A perfectly inelastic demand curve
has a price elasticity coefficient greater than unity.
has a price elasticity coefficient of unity throughout.
graphs as a line parallel to the horizontal axis.
graphs as a line parallel to the vertical axis.
17
Narrow, specifically designated expenditures that are included in more comprehensive legislation are known as
progressive expenditures.
logrolls.
earmarks.
benefits-received allocations.
18
The situation where "the few who yell the loudest get heard" is referred to as the
adverse selection effect.
special-interest effect.
principal-agent problem.
moral hazard problem.
19
Public choice theory focuses on the economics of
government decision making, politics, and elections.
antitrust and regulatory policy.
the behavior of business firms.
fiscal and monetary policy.
20
When price of a product increases 10 percent, quantity demanded decreases 15 percent. The price-elasticity-of-demand is:
1.5
0.67.
6.7.
0.15

Exam 3 - Chapters 5 & 6 Flashcards | StudBud