EPF Module 4 Test Review

Which best describes a public good?

• A good provided by the government 
• A good purchased by individuals
• A good that exists only in a free market
• A good that produces no externalites

A market failure is best described as

• The idea that market forces of supply and demand always provide the maximum benefit for society
• The idea that market forces of supply and demand do not always provide the maximum benefit for society
• The concept that a decision made by one party can have negative effects on another party
• The concept that a decision made by one party can have positive effects on another party

The following statements are true of government regulations except

• They limit economic freedom
• They seek to limit negative externalities
• They exist to protect consumers
• They are always popular with private businesses

Which is not an example of a government safety net?

• Unemployment Insurance
• Social Security
• Consumer Safety 
• Medicaid

Government regulations exist to

• Increase economic freedom
• Protect consumers from negative externalities
• Punish people who intervene in the free market
• Provide incentives to privatize

Which is not an example of a publicly owned industry intended to provide goods and services more efficiently to the public?

• Postal service

• Public transportation

• Airline industry

• Utilities such as gas, water, electric

Market failures occur when

• the accumulation of wealth in the free market is shared between a large group of people

• a command economy increases production

• the economy has a strong GDP and low interest rates

• the distribution of goods and services in the free market is not efficient and leads to loss of social wellbeing

Apartment dwellers who buy fire alarms or fire extinguishers generate a

• negative externality.

• positive externality.

A tax equal to the external cost on firms that emit pollutants would

• not reduce pollution levels at all.

• provide firms with the incentive to increase the level of activity creating the pollution.

• provide firms with the incentive to decrease the level of activity creating the pollution.

• provide firms with little incentive to search for less environmentally damaging production methods.

What is the free rider problem?

• scarcity even when you pay for a good

• Reaping all the benefits without contributing

• Common goods that don't have a price

• none of the above