Virginia Tech EC 201 EC201 Practice Quiz Chapters 4 1)Which of the following is used to refer to the most desirable combination of goods on the production-possibilities curve? A)           Equilibrium output

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EC 201

EC201 Practice Quiz Chapters 4

1)Which of the following is used to refer to the most desirable combination of goods on the production-possibilities curve?

A)           Equilibrium output.         C)            The mixed economy. B)                The optimal mix of output.          D)           Public goods.

2.            The optimal mix of output may not be produced by an economy because of the existence of:

A)           Inequity.              B) Externalities. C) Public goods.                D) All of the above.

3.            From an economic standpoint, government intervention is justified:

A)           When the market mechanism fails to achieve the optimal mix of output.

B)            Because the government will encourage the production of private goods.

C)            Because the government can increase the level of market power of private businesses.

D)           When the private sector is larger than public sector.

4.            The optimal mix of output is always the same as the:

A)           Output consumers demand.

B)            Most desired combination on a production-possibilities curve.

C)            Output the government provides.

D)           Output producers produce.

5.            The market:

A)           On its own may not always provide the optimal mix of goods and services.

B)            Always provides the optimal mix of goods and services.

C)            Always provides a better mix of goods and services without government intervention

failure.

than it does with government intervention.

D)           May not produce the optimal mix of output, which is known as government

6.            Which of the following is possible when the market fails?

A)           The mix of goods and services is inside the production-possibilities curve.

B)            Government intervention will improve the mix of goods and services.

C)            The mix of goods and services is at the wrong point on the production- possibilities

curve.

D)           All of the above could be true.

7.            Which of the following is most likely a private good?

A)           Cars.      B) National defense.      C) Sidewalks.     D) The administration of justice.

8.            Governments usually build highways because it is difficult to exclude individuals who don't pay for the highways from using them. What type of failure is involved?

A)           Inequity.              B) Public goods.                C) Externalities. D) Market power.

9.            Which of the following would occur if police protection was marketed entirely as a private good?

A)           Police protection would be overproduced.

B)            It would no longer be a public good.

C)            The federal government would have to use its antitrust authority to regulate this market.

D)           Only those that could afford police protection would receive it.

10.          The term externalities refers to:

A)           Black-market economic activity.

B)            All costs and benefits of a market activity borne by a third party.

C)            The impact on markets of goods imported from foreign countries.

D)           Illegal economic activity.

11.          Antitrust activity addresses:

A)           Market power. B) Inequity.        C) Macro instability.        D) All of the above.

12.          A natural monopoly is:

A)           An industry that is dominated by a single firm.

B)            An industry in which one firm can achieve economies of scale over the entire range of

market supply.

C)            An unregulated monopoly.

D)           A monopoly that always benefits society even when it is unregulated.

13.          The federal government's role in providing aid to the poor and the aged is justified because of concerns about:

A)           Market power. B) Inequity.        C) Macro failure.              D) Restricted supply.

14.          A merit good is:

A)           Income payments for which no goods or services are exchanged.

B)            A good society holds to a higher standard in tax regulations.

C)            A good or service that society believes everyone is entitled to a minimal quantity

of.

D)           A product that serves as an incentive to produce more output.