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Unformatted text preview: CHAPTER 18GOVERNMENT IN THE MARKET ECONOMY MULTIPLE CHOICE 1. Water pollution is a familiar type of: a. private good. b. positive externality. c. social benefit. d. negative externality. ANS: D 2. At the socially efficient price-output level: a. external costs equal zero. b. marginal social benefit equals marginal private benefit. c. marginal social cost equals marginal private cost. d. social marginal benefit equals social marginal cost. ANS: D 3. Social marginal cost is the cost borne by: a. all individuals in the economy. b. individuals with no direct role in a given transaction. c. all firms in the economy. d. the government. ANS: A 4. If investment in a public project makes at least one individual better off and no one worse off, the res- ult is called: a. Pareto satisfactory. b. Pareto optimal. c. a potential Pareto improvement. d. none of these. ANS: A 5. Expenses that are not directly borne by producers or their customers are called: a. marginal external costs. b. marginal social costs. c. marginal private costs. d. opportunity costs. ANS: A 6. A method used to determine how to best employ resources in a given social program or public-sector investment project is called: a. social net present value analysis. b. social benefit-cost ratio analysis. c. social internal rate of return analysis. d. cost-effectiveness analysis. ANS: D 7. If use by certain individuals does not reduce availability for others, then a good or service is said to display: a. the nonrival consumption concept. b. the nonexclusion concept. c. positive net social benefits. d. the private good concept. ANS: A 8. When an anticipated program or project involves positive net benefits it is: a. Pareto satisfactory. b. Pareto optimal. c. a potential Pareto improvement. d. of benefit to at least one individual, and hurts no one. ANS: C 9. When government-run enterprise is sold to the private sector, this process is known as: a. privatization. b. liquidation. c. nationalization. d. deregulation. ANS: A 10. One important difference between private and public institutions is: a. that private sector institutions involve exploitation. b. the existence of discrimination in the private sector. c. the power of compulsion or coercion. d. the importance of self-interest in the private sector. ANS: C 11. Adam Smith's belief that the pursuit of self-interest by individuals leads to social betterment is called the: a. public good. b. elimination of externalities. c. invisible hand. d. private good. ANS: C 12. It is not generally considered to be an appropriate function of government to: a. produce public goods. b. alter individual preferences. c. eliminate externalities. d. stabilize the economy....
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This note was uploaded on 03/08/2011 for the course ECONABA 635 taught by Professor Leiter during the Summer '10 term at Andrew Jackson.
- Summer '10