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Principles of Microeconomics, 1st Canadian Edition

Robert H. Frank, Cornell University
Ben S. Bernanke, Princeton University
Lars Osberg, Dalhousie University
Melvin Cross, Dalhousie University
Brian MacLean, Laurentian University

Public Goods and Taxation

Post-Test


1	If it's impossible or highly costly to prevent consumers from consuming a good when they have not paid for it, the good would be classified as a(n) __________ good.
		A)	nonexcludable
		B)	pure public
		C)	private
		D)	nonrival
		E)	common


2	Which of the following is not a proper justification for charging the government with the responsibility for collecting revenues to finance a public good?
		A)	No individual may have a reservation price high enough to pay for a public good.
		B)	Negotiation between private citizens about each person's contribution is costly.
		C)	Individuals may attempt to free ride on the contributions of others.
		D)	The costs of the public good exceed the benefits.
		E)	The number of citizens affected may be so large as to render private negotiation impossible.


3	A tax that results in a larger fraction of income being paid in taxes as income rises is a ________ tax.
		A)	regressive
		B)	head
		C)	progressive
		D)	proportional
		E)	flat


4	A tax that results in the same fraction of income being paid in taxes as income rises is a ________ tax.
		A)	regressive
		B)	head
		C)	progressive
		D)	proportional
		E)	None of the above.


5	Banff National Park is a jointly consumed good in the sense that
		A)	the size and beauty of the park is the same for all visitors.
		B)	typically only families visit the park.
		C)	while the government owns the park, private firms provide the lodgings.
		D)	all taxpayers pay for its upkeep even if they don't visit the park.
		E)	it is a national resource.


6	The problems of externalities and poorly formed property rights are
		A)	minor in modern economies.
		B)	additional rationales for the existence of government.
		C)	better solved by private rather than government action.
		D)	the only two legitimate reasons for creating government.
		E)	easily solved by individuals.


7	Radio and broadcast television are examples of
		A)	collective goods.
		B)	private goods.
		C)	pure public goods provided by the government.
		D)	rival yet nonexcludable goods.
		E)	pure public goods provided by private firms.


8	The best example of a pure public good is
		A)	cable TV.
		B)	a national park.
		C)	national defense.
		D)	social security.
		E)	education.


9	The best goods to tax are those
		A)	with an elastic supply or demand.
		B)	with an inelastic supply or demand.
		C)	with a price that does not exceed 5% of average consumer income.
		D)	that the government wants people to consume more frequently.
		E)	those that yield large profits to suppliers.


10	Government subsidizes education because
		A)	it is a pure public good.
		B)	private firms will not provide education.
		C)	of custom and tradition.
		D)	education is thought to have positive externalities.
		E)	it wants to advance its agenda.

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