Test Bank for Public Finance and Public Policy 5th Edition by Gruber

Name: ______________ ____________ Date: _____________ 1. As a resul resultt of the Affordable the Affordable Care Act passed in 2010: A) ins insuran urancce ccompanies ompanies are allowed to discriminate against those with medical conditions that are too expensive to treat. B) indi indivi vidu dual alss who cannot afford health insurance have all been enrolled in Medicaid. C) indi indivi vidu dual alss who can afford health insurance must purchase it or pay a penalty. D) the gove overnment is no longer attempting to control the costs of providing medical care. 2. The The goal goal of of publ public ic finance is to: A) unde unders rsta tand nd the proper role of corporations in the economy. B) und understand the proper role of the government in the economy. C) det determine the best way to increase government's role in the economy. D) det determine the the best way to decrease government's role in the economy. 3. The The goal goal of of publ public ic economics, or public finance, is to answer which question? A) How might the government intervene in the economy and what are the likely effects? B) Why do profit-maximizing firms attempt to set marginal revenue equal to marginal cost? C) How ar are th the terms of trade determined when countries choose to engage in international trade? D) What are the goals and tools of macroeconomic policy? 4. Governm Government ent inte intervenes in a market economy to: A) cre create ate ext exter nalities. B) prev preveent com petition. C) enh enhanc ance economic efficiency. D) ach achiev ieve pe per fect income equality. 5. Supp Suppos osee Juan Juan values values a slice of pizza at $1.50, but the pizza shop is unwilling to sell a slice of pizza for less than $2.00. These values imply that: that: A) it is eff efficie icien nt for the shop to sell a slice of pizza to Juan for $1.50. B) it is eff efficie icien nt for the shop to sell a slice of pizza Juan for $2.00. C) the shop ne needs to produce more efficiently in order to lower the price. D) it is not not effi efficient cient for the shop to sell a slice of pizza to Juan. 6. Suppos Supposee Ali Ali values values a slice of pizza at $1.50, but the pizza shop is unwilling to sell a slice of pizza for less than $1.00. These values imply that that it is efficient for the shop to sell a slice of pizza to Ali for any price: A) grea greate terr than than or or equal to $1.50. B) grea greatter tha than or equal to $1.00 and less than or equal to $1.50. C) less ess th than or equal to $1.00. D) les less than than or equal to $1.00 and greater than or equal to $1.50. 7. Suppos Supposee a studen studentt values a textbook at $50, and the publisher is unwilling to sell the textbook at a price lower than $30. What price will lead to an to an efficient transaction between the student and publisher? A) a pr price of of $0 $0 B) any any pri price gr eater than $0 and less than $30 C) any any pri price gr eater than or equal to $30 and less than or equal to $50 D) any any pr price gr eater than $50 8. Supp Suppos osee a consu consumer mer values a certain 19-inch television set at $150, and the seller is unwilling to sell the set for less than $200. These values values imply that: A) it is eff efficie icien nt for the seller to charge a price of $0. B) it is eff efficie icien nt for the seller to charge any price greater than $0 and less than $150. C) it is eff efficie icien nt for the seller to charge any price greater than or equal to $150 and less than or equal to $200. D) it is not not effi efficient cient for a transaction to take place. 9. Supp Suppos osee you hea hearr someone argue that the proper role of government is to increase the size of the pie. Which justification for government inter vention vention in the economy is this person referring to? A) incr increa eassing ing equality in the economy B) prom promot otiing social justice C) improving efficiency D) prev preven enti ting ng competition 10. Suppos Supposee the the gov government ernment proposes a program that will transfer income from one group to another. The goal of this government inter vention vention in the marketplace is best characterized as: A) redi redist strribut ibutio ion. n. B) incr ncreasi asing market efficiency. C) cor correctin ting a market a market failure. D) ach achiev ieving competitive competitive equilibrium.

Page 1 Full file at https://testbanku.eu/Test-Bank-for-Public-Finance-and-Pu https://testbanku.eu/Test-Bank-for-Public-Finance-and-Public-Policy-5th-Edition blic-Policy-5th-Edition-by-Gruber -by-Gruber

11. If the competi competitiv tivee equilibrium does not lead to the efficiency-maximizing outcome, then government intervention: A) will will incr increa easse efficiency. B) will re reduce uce efficiency. C) may increas ease or decrease efficiency. D) will will not not af affect fect efficiency. 12. Suppos Supposee gov govern ernment ment proposes taxing Peter to pay Paul. The goal of this intervention could be best characterized as an attempt to achieve: achieve: A) redi redist strribut ibutio ion. n. B) eff efficie ciency. C) market failure. D) comp compet etit itiv ivee equilibrium. 13. The equity– equity–eff effic iciency iency trade-off means that the result of obtaining __________ in equality is also to obtain __________ in the so-called size of the pie. A) no chan hange; a decrease B) no chan hange; an increase C) a dec decrrease; ase; a decrease D) an incr increa ease se;; a decrease 14. Suppos Supposee the the gov government ernment taxes the rich to distribute money to the poor. Which of the following is an example of an efficiency loss? A) Rich pe people ple take home less of the money from their jobs because of the tax. B) Rich people ple don't work as hard because of the tax. C) Poor oor peopl ople are better off because of the redistribution. D) Poor oor pe peopl ople work just as hard because they still need to make ends meet. 15. An interve interventio ntion n in in which government establishes a federally funded health care service for everyone and pays doctors and medical practitioners practitioners directly is called: A) private private prov provisi ision on with with public public finan financin cing. g. B) restri restrictio ction n or mandate mandate of privat privatee sale or purc purchase hase.. C) subsidy. D) publ public ic pro provi visi sion on.. 16. Both the federal and state state governments collect fees for each gallon of gasoline sold. This is an example of which type of government intervention? A) restri restrictio ction n of privat privatee sale sale or purch purchase ase B) taxation C) subsidy D) publ public ic prov provis isio ion n 17. Which type of government intervention can be used to lower lower the price for private sales or purchases of underproduced goods? A) public public financ financing ing of of private private provis provision ion B) restri restrictio ctions ns or mandat mandates es of privat privatee sale or purch purchase ase C) taxes D) subsidies 18. Veterans receive health benefits directly through hospitals owned and operated by the Veterans Health Administration. Administration. This is an example of: A) public public financ financing ing of of private private provis provision. ion. B) restri restrictio ction n or mandate mandate of privat privatee sale or purc purchase hase.. C) a su subsidy. D) publ public ic pro provi visi sion on.. 19. The Medicare insurance program in the United States reimburses hospitals and doctors for providing health care services to the elderly. This is an example of: A) public public financ financing ing of of private private provis provision. ion. B) restri restrictio ction n or mandate mandate of privat privatee sale or purc purchase hase.. C) a tax. D) a subs ubsidy. dy. 20. Public schools schools in the United States are operated operated by the government. government. This is an example of: A) public public financ financing ing of of private private provis provision. ion. B) restri restrictio ction n or mandate mandate of privat privatee sale or purc purchase hase.. C) a su subsidy. D) publ public ic pro provi visi sion on..


21. The governm government ent has passed many school accountability measures that reward schools if their students score highly on standardized tests. tests. Suppose schools respond by manipulating the set of test-takers to increase average scores. This outcome is an example of a(n): a(n): A) inte intend nded ed eff eff ect. ect. B) dir direct ect effe effect ct.. C) indi indire rect ct eff effect. D) desi desirred outc outcome. ome. 22. The governm government ent has passed many school accountability measures that reward schools if their students score highly on standardized tests. tests. Suppose schools respond by more efficiently teaching their students. This outcome is an example of a(n): A) inte intend nded ed,, direct direct effect. B) inte ntended, ed, in indirect effect. C) uni unintende nded, direct effect. D) unin uninte tend nded ed,, indirect effect. 23. Suppos Supposee that that because because the government increases the minimum wage, employees who were earning the minimum wage get a pay increase. This This is an example of a(n): A) inte intend nded ed,, direct direct effect. B) inte ntended, ed, in indirect effect. C) uni unintende nded, direct effect. D) unin uninte tend nded ed,, indirect effect. 24. Which Which of of the the foll following owing might be a direct effect of providing free health care for those without insurance? A) Those ose who were without private health insurance are now better off. B) Those ose with private health insurance may drop their c overage. C) Those ose without hout health insurance may purchase private health insurance. D) Thos Thosee elig eligib ible le for free health insurance are not aware of the benefit. 25. Which Which of of the the foll following owing is the government agency that uses empirical economics to achieve its mission of providing Congress with objective, nonpartisan analyses necessary for economic and budget decisions? A) Nationa Nationall Burea Bureau u of Econo Economic mic Rese Research arch B) Office Office of Managem Management ent and Budget Budget C) Antitr Antitrust ust Divis Division ion of the the Departm Department ent of Just Justice ice D) Congres Congressio sional nal Budget Budget Office Office 26. Suppose that because the government increases the minimum wage, employers choose to hire fewer workers. This is an example of: A) an int inten ende ded d effe effect ct.. B) a dir direc ectt eff effec ect. t. C) an indi indire rect ct effe effect ct.. D) a des desir ired ed outc outcom ome. e. 27. The government offers unemployment benefits to workers who who have lost their jobs and not yet found new ones. Which Which of the following is an example of an indirect unintended effect of the government intervention? A) Recipien Recipients ts reduce reduce their their job searc search h activiti activities. es. B) Recipients Recipients can can still still afford afford to pay health health insuranc insurancee premiums. premiums. C) Recipien Recipients ts are at less less risk risk for for falling falling into into povert poverty. y. D) Potential Potential recipient recipientss choose choose not to to file file for for benefits benefits.. 28. Suppose the government wishes to provide college tuition aid to one of the following groups of high school students. In which target group would the possible extent of indirect effects be most limited? A) students students with with relatively relatively low Scholast Scholastic ic Aptitude Aptitude Test scores B) student studentss whose whose fath fathers ers have have died died recent recently ly C) student studentss who who earn earn less less than than $2,000 $2,000 per per year year D) student studentss who live live in low-in low-incom comee neighbor neighborhood hoodss 29. Which of the following might be an indirect unintended effect of providing income support to those without jobs? A) Those Those without without jobs jobs are made better better off. off. B) Those Those witho without ut jobs jobs are are made made wors worsee off. off. C) People People without without jobs jobs now now search search for and and acquire acquire jobs. jobs. D) People without without jobs jobs no longer search for and and acquire acquire jobs. jobs. 30. How governments should intervene is a _________ question, and why governments intervene in the way they do is a __________ question. A) norma normati tive ve;; norm normati ative ve B) posi positi tive ve;; nega negati tive ve C) norm normat ativ ive; e; posi positi tive ve D) pos positi itive ve;; norma normati tive ve


31. If governm government ent revenues revenues exceed government spending, the difference is called the: A) cas cash flow deficit. B) cash fl flow surplus. C) debt. D) budget. 32. The accumul accumulatio ation n of past deficits over time is measured by the: A) cas cash flow deficit. B) cash fl flow surplus. C) debt. D) budget. 33. The current current fede federal debt of the United States is ______ of the gross domestic product. A) less ess th than 15% B) app approximately 30% C) app approximately 60% D) over 100% 34. Nation National al defe defense nse is is a classic example of what economists call: A) a pu public go good. B) enti entitl tlem emen entt spending. C) socia cial in insur ance. ance. D) a priv privat atee ser ser vice. vice. 35. Which Which of of the the foll following owing correctly depicts the changes in the sources of federal, state, and local receipts in the past 50 years? A) Incom come tax taxees are now a larger share of federal receipts. B) Prope operty tax taxes es are now a larger share of state and local receipts. C) Corporat oratee and excise taxes are now a smaller share of federal receipts. D) Sale Saless taxe taxess constitute the exact same share of state and local receipts. 36. By A) B) C) D)

2010, approximately ________ of the nonelderly United States population did not have health insurance. 5% 15 % 18 % 25 %

37. Social Security is the single largest government expenditure program; however, the system is projected to have insufficient funds to pay promised retiree benefits in less than 30 years. What is the main solution that liberals suggest to cope with this problem? A) raising the necessary necessary resources resources through through higher payroll payroll taxes taxes or some some other means B) encouraging encouraging individu individuals als to save save for for their their own retirement retirement C) encoura encouragin ging g inflow inflow of young young immigra immigrants nts D) enactin enacting g policies policies that that bring bring higher higher birt birth h rates rates 38. Which of the following is generally TRUE regarding proposed solutions to problems in the educational system in the United States? A) Liberals Liberals advocate increased increased competition competition among among schools, schools, while conservative conservativess advocate higher higher teacher pay and increasing increasing resources given to disadvantaged schools. B) Liberals Liberals advocate higher higher teacher pay and increased increased resources resources given to disadvanta disadvantaged ged schools, schools, while conservative conservativess advocate increased competition among schools. C) Both liberals liberals and conservativ conservatives es advocate advocate increased increased competition competition among among schools. schools. D) Both liberals liberals and conservatives conservatives advocate advocate higher higher teacher pay and increased increased resources resources given to disadvantage disadvantaged d schools. 39. Which of the following changes were introduced with the passage of the Affordable Care Act? A) increased increased government government regulation regulation of insurance insurance markets and reduced reduced reliance reliance on private health health insurance insurance providers providers B) introduction introduction of new subsidies subsidies for for the purchase of health health insurance insurance and expanded private private health insurance insurance through through state exchanges C) elimination elimination of subsidies subsidies for the purchase purchase of health health insurance insurance and new requirements requirements that low-incom low-incomee individuals individuals bear the full burden of insurance costs D) expanded coverage coverage by government government and and reduced reliance reliance on private private health health insurance insurance providers providers 40. Does taxing taxing the wealthy to give benefits to the poor increase increase social welfare? welfare? Explain. 41. Suppose the White House House could appoint the lead officials at the Congressional Budget Office (CBO). Do you think this change could affect the level of budget deficits? Explain. 42. Are all of the indirect indirect effects of government interventio intervention n in the economy unintended unintended effects? Explain. Explain.


43. Suppos Supposee som someon eonee says that a relatively small percentage of Americans own a large percentage of total assets and that therefore the government government should redistribute wealth to those less fortunate. Which part of that statement is normative and which part is positive, positive, if any? Explain. 44. Calcul Calculate ate real government government expenditure in base year (Year 1) dollars, then calculate real per capita expenditure and the percentage change change in real per capita expenditure using the hypothetical data below. Hypothetical Hypotheti cal Data on Government Expenditure, the Price Level, and Population Total Price Index Real Population Real Per Government Government (millions) Capita Expenditures Expenditures Government (millions) (millions) Expenditures Year 1 $9 1 6 ,8 00 10 0 $ _ _ __ _ _ _ _ _ _ 2 40 $__________ Year 2 $1,175,796 2 08 $ __ _ __ _ _ _ __ 2 50 $__________

Between year 1 and and year 2, real government expenditure per capita increased ________ %. 45. What What are are the the fun fundamental damental issues that the supporters and opponents of Affordable Care Act (ACA) cannot agree on? Explain.


Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

C B A C D B C D C A C A D B D B D D A D C A A A D C A B D C B C D A C C A B B It depends. Taxing the rich to give benefits to the poor may decrease efficiency. For example, it may reduce rich people's incentive to work, which would reduce the total size of the economic pie. In addition, raising money through taxes is not free. There is typically an administrative cost of doing so, which reduces the size of the economic pie. However, taxing the wealthy to give benefits to the poor would increase equity, which may be valued by society in and of itself. Consequently, to answer the question about social welfare, you need to know how society values the efficiency–equity trade-off. 41. It is possible that the analysts at the CBO would be pressured to make particularly rosy budget predictions of the cost of legislation supported by the administration. Those predictions could help pass that legislation, either because politicians believed the estimates or because they were unsure about the true costs. The result could e asily be an increase in budget deficits. 42. In many cases, indirect effects of government intervention are unintended. For example, if the government offers a plan to the uninsured in order to make sure that everyone can afford health insurance, an indirect result of that policy might be that the insured drop their insurance. Such an effect is indirect because it resulted from a change in behavior induced by the policy, and in this case the effect is also unintended. In contrast, however, many government interventions are intended to change people's behavior. For example, government ma y institute fines for traffic infractions like speeding. To the ex tent that these fines reduce speeding, that policy has an indirect effect that is also an intended effect. 43. Pointing out the facts about the income or wealth distribution is a purely positive statement, since it is describing how things are. Stating that the government should do do something in response is a normative statement, however, since it is saying how things should be as opposed to how they are. Consequently, the first part of the statement is positive and the second part is normative. 44. Real government expenditure (in millions) equals $916,800 in Year 1 and $1,088,700 in Year 2. Real per capita expenditure equals $3,820 in Year 1 and $4,354.8 in Year 2. Real government expenditure per capita increased 14%. 45. The proper role of the government in dealing with health care coverage and costs is the fundamental controversy among the supporters and opponents of ACA. Supporters argue that the bill corrects failed insurance markets, reduces the economic burden on the uninsured, and moves to control he alth care costs in the long run. On the other han d, opponents of the legislation view the ACA as an unwarranted expansion of government power into the health care sector—and an enormous expansion of government spending at a time of high deficits.


Test Bank for Public Finance and Public Policy 5th Edition by Gruber

Recommend Documents