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Economics, 7/e

David Begg, Birkbeck College, University of London
Rudiger Dornbusch
Stanley Fischer

Government spending and revenue

Self-test Questions

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.


1	A good example of a public good is ___________

		A)	public transport
		B)	the national health service
		C)	national defence
		D)	rail transport

2	If the consumption of a good by one person does not reduce the quantity available by others and nobody can be easily excluded from consumption, we are referring to a

		A)	private good
		B)	merit good
		C)	public good
		D)	abundant good

3	Satellite television subscription and television detection devices are ways in which broadcasting companies address the ____________ problem

		A)	externality
		B)	market imperfection
		C)	deadweight burden
		D)	free-rider

4	An example of a merit good is

		A)	a system of justice
		B)	a dose of medicine
		C)	a bar of chocolate
		D)	compulsory education

5	A politician will improve his chances of holding office by offering policies appealing to the _______________

		A)	middle income groups
		B)	the poor
		C)	the median voter
		D)	minority groups

6	Except for taxes to offset ____________, taxes are _____________

		A)	imperfect competition, popular
		B)	externalities, distortionary
		C)	inequality, a first best option
		D)	poor health, unnecessary

7	Taxes create a wedge between the sales price and purchase price that prevents the price system equating _________ and ____________

		A)	marginal costs, marginal benefits
		B)	demand, supply
		C)	marginal cost, marginal revenue
		D)	marginal cost, average cost

8	The effect of a tax to offset a negative externality will be to ___________ price and ____________ quantity

		A)	reduce, reduce
		B)	increase, increase
		C)	increase, reduce
		D)	reduce, increase

9	The Laffer curve shows that beyond some ________ tax revenue will __________

		A)	income, increase
		B)	consumption, decline
		C)	growth rate, increase
		D)	tax rate, decline

10	The Tiebout model considers that people choose to live in areas providing the package of ________ and ___________ they want

		A)	public spending, taxes
		B)	schools, hospitals
		C)	public order, health care
		D)	housing, shops

11	Taxes to offset externalities are distortionary

		A)	TRUE
		B)	FALSE

12	Supply-side economics analyses how taxes and other incentives affect national output when the economy is at full capacity

		A)	TRUE
		B)	FALSE

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