Chap 14: Public Goods and Tax Policy

A common good is a good/ service that...

* a) to at least some degree, is nonexludable but rival

b) to at least some degree, is nonrival but exludable

c) to a high degree, is both rival and excludable

d) to a high degree, is both nonrival and nonexludable

Public goods are goods and services that are, to varying degrees...

* a) nonexludable

b) nonessential

* c) nonrival

d) nontaxable

The socially unproductive efforts of people or firms to win a prize is known as...

a) pork barrel spending

b) crowding out

* c) rent-seeking

d) logrolling

Governments are important because they can...

a) easily determine the socially optimal level of output for different goods and services

* b) provide public goods

* c) establish and enforce property rights

* d) regulate activities that generate externalities

Taxes can increase total surplus if the government taxes activities that generate...

a) positive externalities

b) neither positive nor negative externalities

* c) negative externalitites

A public expenditure that is larger than the total benefit it creates but that is favored by a legislator because his/her constituents benefit from the expenditure by more than their share of the resulting extra taxes is known as...

* a) pork barrel spending

b) logrolling

c) rent-seeking

d) a regressive tax

A good or service that, to a high degree, is both nonrival and nonexcludable is a...

a) collective good

b) pure private good

* c) pure public good

d) pure common good

One advantage of ______________ government is that they are better able to cope with externalities that transcend local boundaries.

* a) centralized

b) local

One problem with the deficit spending is that it can...

* a) lower economic growth because it leads to crowding out

b) lower economic growth because it prevents crowding out

Government borrowing that leads to higher interest rates, causing private firms to cancel planned investment projects is known as...

Crowding out

T/F: Private companaies never provide public goods

False: pubic goods can be privately provided through donations, private contracting, the sale of byproducts and the development of new ways of excluding nonpayers

A good or service for which nonpayers can be easily excluded and for which each unit consumed by one person means less unit available for others is a...

a) common good

* b) pure private good

c) pure public good

d) collective good

A tax under which the proportion of income paid in taxes rises as income rises is a...

a) proportional income tax

* b) progressive tax

c) regressive tax

If you try to reduce government spending by reducing the amount of money the government can collect in taxes, you will reduce...

* a) both wasteful and worthwhile government spending

b) only worthwhile government spending

c) on wasteful government spending

If the government raises revenue by taxing goods that generate negative externalities, economic surplus will...

* a) increase

b) decrease

c) stay the same

A pure private good is a good/service...

* a) that, to a high degree, is both rival and excludable

b) that, to at least some degree, is nonrival but excludable

c) that, to a high degree, is both nonrival and nonexcludable

d) that, to at least some degree, is nonexludable but rival

A progressive tax is a tax under which...

a) all tax payers pay the same proportion of their income taxes

* b) the proportion on income in taxes rises as income rises

c) the proportion of income paid in taxes declines as income rises

T/F: One problem with attempting to reduce wasteful government spending by requiring the government to spend less is that this would also reduce spending on public services whose benefit exceeds their cost

True: requiring the government to spend less will lower government spending on both wasteful and worthwhile public services