Fundamentals of Economics

Multiple choice

1. An externality occurs when (best answer)

a. production capacity is shifted outside the physical boundaries of the plant

b. the cost to society of producing a product is larger than the cost to producers

c. governments become involved in regulating the industry

d. a good is not excludable

e. opportunity costs are not measured

2. Public goods is

a. are goods anyone is free to participate

b. are controlled by government

c. are also known as common resources

d. are both excludable and rival in consumption

e. are neither excludable nor rival in consumption

3. In terms of measuring government tax revenue as a percentage of GDP

a. compared to other industrialized countries, the United States absolutely the lowest

b. compared to other industrialized countries, the United States is among the lowest

c. compared to other industrialized countries, the United States is somewhere in the middle

d. compared to other industrialized countries, the United States is among the highest

4. When describing the US federal government budget, social security can best be classified as

a. a fully funded system

b. declining as a percentage of the federal budget

c. transfer payments

d. discretionary spending

5. The largest percentage of a state's budget is directed towards

a. education

b. highways

c. state parks

d. prisons