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This midterm exam consist of 35 multiple choice questions and covers the material in Chapters 1 through 7. There are five questions from each Chapter. Question 1: If the economy is operating at full employment and using resources efficiently, then an increase in spending for homeland security this year will: Question 2 Following the circular flow of a mixed economy, firms receive a flow of dollars from and send goods and services to: Question 3 In 2008, which country listed below has the highest percentage of government spending relative to GDP? Question 4 Federal government expenditures in the United States account for about: Question 5 A mixed economy is one in which: Question 6 The extra benefit on one more unit of a good or service is its: Question 7 Normative economics is: Question 8 Diamonds are sold by a monopoly firm that maximizes profits. Then it follows that:


Question 9 Positive economics: Question 10 If the efficient output of a good is produced each week, then the Question 11 The current competitive market price of fish is $3 per pound. A chemical producer emits effluent into a lake used by a commercial fishing firm. Each ton of chemical output causes a 20-pound reduction in the annual catch of the fishing firm. Assuming that transactions costs are zero and the chemical firm has the legal right to dump effluent into the lake, Question 12 Assuming a product can be manufactured competitively without any externalities at an efficient quantity of 500 units and an efficient price of $150.00 per unit, what efficient quantity-price net subsidy combination would be consistent with a corrective subsidy for a positive externality? Question 13 If a positive externality prevails in the market for smoke detectors, then when the market is in equilibrium, Question 14 The competitive market equilibrium price of sanitation services in a small town with no government-supplied sanitation services is $2 per trash pickup. There is a $1 marginal external benefit associated with each trash pickup. The elasticity of supply of trash pickups is infinite in the long run, implying a horizontal supply curve. To achieve the efficient output of sanitation services, Question 15 According to the Coase theorem, externalities can be internalized when transactions costs are zero through: Question 16 Education is: Question 17 Cable TV programming is an example of a:


Question 18 The marginal cost of making a given quantity of a congestible public good available to more con sumers is: Question 19 Public transportation is: Question 20 The principle of nonexclusion for pure public goods means that the benefits of the good: Question 21 The plurality rule is: Question 22 A public choice is: Question 23 A community currently hires 10 security guards per week to patrol their neighborhood. Each secu rity guard costs $300 per week. Assuming that the tax-sharing arrangement agreed to results in each of 300 voters paying the same tax share, each voter pays a weekly tax bill of: Question 24 Which of the following collective choice rules is likely to incur the highest political transactions costs? Question 25 If the marginal social benefit of one more unit of a good is 10 and the marginal social cost of one more unit of a good is 11, then: Question 26 Program budgeting is a way to: Question 27 A government agency has a new hydroelectric project that will take 15 years to build before it pro vides any benefits. The net present value of the project will be highest under which of the following discount rates?


Question 28 The process of taking a previous period’s budget and making minor changes to produce the current year’s budget is called: Question 29 If the social rate of discount falls, then the efficient amount of government capital spending will: Question 30 The mission of a government agency is: Question 31 A welfare recipient receives a cash transfer of $100 per week. This grant is not reduced if the recipient earns less than $20 per week. However, after the recipient earns more than $20 per week, the grant is reduced by 66 cents for each dollar of earnings. The cash transfer will be reduced to zero if the recipient earns: Question 32 Government transfers to the poor in the United States: Question 33 Temporary Assistance to Needy Families (TANF) replaced: Question 34 In the United Stated, which of the following years had the highest poverty rate? Question 35 The Supplemental Nutrition Assistance (formerly called food stamps):


Eco 450 week 5 mid term exam (devry)