PUBLIC FINANCE

PRELIM EXAM
SEPTEMBER 29, 2021

1. Government expenditures are financed mainly by:

a. Individuals b. society c. taxes d. none of the above

2. It is the study of the ways individuals make choices to use scarce resources
to satisfy their desires.
a. Public Finance b. Economics c. Management d. none of the above

3. The basic needs which an individual needs include, what is the correct answer
a. Food b. Clothing c. Shelter d. all of the above

4. It is the field of economics that studies government activities and the alternative means of
financing government expenditures
a. Public Economics b. Public Finance c. Public Management d. All of the above

5. _________ are organizations formed to exercise authority over the actions of people who live
together in a society and to provide and finance essential services.
a. Governments b. Corporations c. Institutions d. All of the Above

6. It constitutes the rules and generally accepted procedures that evolve in a community for
determining what government does and how government outlays are financed.
a. Individuals b. Government c. Society d. Political Institutions

7. The government provision of goods and services requires, which is not

a. labor b. land and building c. equipment d. capital and taxes

8. Private goods and services include, which is not

a. Food b. clothing c. roads d. all of the choices

9. Roads, bridges, schools, national security are goods and services from
a. Private b. Government c. taxes d. all of the choices

10. A kind of economy where the government supplies a considerable amount of goods and services
and regulates private economic activity.
a. Gross Domestic Product (GDP) b. Pure Market c. Mixed d. All of the Choices

11. An economy where all goods and services are supplied by private firms for profit and all
exchanges of goods and services would take place in market with prices based on the supply and
demand
a. Market Economy b. Pure Market Economy c. Mixed d. a and b

12. Economics is the branch of knowledge concerned with the -

a. Production of wealth b. consumption and transfer of wealth
c. a and b d. None of the above
13. The effect of a nation without a government are the following, which is not:

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 a. There will be no system of courts to administer justice;
b. There will be no SSS or other security programs for the elderly or the poor;
c. Non-maintenance of roads, schools, public hospitals, clinics,
d. All of the above

14. These are the basic political institutions, which is not:

a. Government b. Family c. Society d. Education

15. Government provides goods and services, such as, which is not –
a. Luxury and Comfort c. Infrastructure and Centers
b. Roads and Bridges d. all of the above

16. Government goods are distributed through individuals and

a. By Group c. Nonmarket Rationing
b. Person to Person d. All of the Above

17. In Mixed Market Economy, its characteristics include: which is not -

a. Supplied by Political Institution c. For Profit
b. Due to Political decision d. Not according to one’s needs

18. In Pure Market Economy, it is according to one’s capacity and needs, supplied by:
a. Individual c. Government
b. Society d. All of the above

19. ____________ is a scientific approach to analysis that establishes cause and effect relationships
among economic variables.
a. Public Economy c. Positive Economics
b. Public Finance d. None of the above

20. Marginal Net Benefit is the difference between Marginal Social Benefit minus –
a. Marginal Social Costc. Total Cost Benefit
b. Marginal Cost Benefit d. None of the choices

21. A perfectly competitive market system exists if, which is not:

a. Not all productive resources are privately owned;
b. All transactions take place in market with competing sellers
c. Economic power is dispersed
d. All of the above

22. Market Interaction fails to achieve efficiency when: which is the correct answer -
a. Government activity itself can cause inefficiency
b. The Marginal social benefits of a government program must exceed its marginal
social costs to result in Net Benefits
c. Prices do not always reflect the marginal social benefits or marginal social cost of
output
d. All of the Above

23. Markets will also fail to result in efficient manner of output when what power is exercised?

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 a. Government Power c. Monopolistic power
b. Police Power d. Emergency Power

24. _______________ are costs or benefits in market transactions not reflected in prices –
a. Extremities c. Internalities
b. Externalities d. c and b

25. In market transactions, the parties are the buyer, seller and _______, which is the correct answer
-
a. Third party c. Household
b. Business d. All of the above

26. Negative Externalities are otherwise known as, which is not –

a. Negative Cost c. External Cost
b. A and B d. None of the Choices

27. The effects of increase or decrease in the price of a good on existing consumers as a result of
changes in the demand or supply of a good is called, which is the correct answer:
a. Pecuniary Externalities c. Real Externalities
b. Negative Externalities d. All of the Above

28. ___________ are unpriced costs or benefits. They are the effects of market exchanges external
to prices.
a. Pecuniary Externalities c. Real Externalities
b. Negative Externalities d. All of the Choices

29. It is a legal and economic principle regarding property rights, which states
that where there are complete competitive markets with no transaction
costs and an efficient set of inputs and outputs, an optimal decision will
be selected

a. Coase Theorem c. Coarse Theorem

b. Costs Theorem d. None of the Choices

30. Public Goods are goods with benefits that cannot be withheld from those
who do not pay and are shared by large groups of consumers. The
statement is –
a. False c. True
b. Not True d. Both
31. The following are the categories or characteristics of goods and services, which is not –
a. Pure Private Good c. Congestible Public Goods
b. Pure Public Goods d. Pure Government Goods

32. A good which is consumed by all members of a community as soon as it is produced for any one
member is called:
a. Pure Public Good c. Private Goods
b. Pure Private Goods d. Public Good

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 33. One that generates no externalities, neither when produced nor
when consumed.
a. Pure Public Good c. Private Good
b. Pure Private Good d. Public Good

34. One that is made through political interaction of many people

according to its established rules is called –
a. Public Good c. Public Choice
b. Private Good d. Private Choice

35. It is an agreement on the level of production of one or more public

goods, given a specified rule for making the public choice and the
distribution of tax shares among individuals –
a. Political Choice and Equity c. Political Parties
b. Political Equilibrium d. Political Externalities

36. The most commonly used public choice rule is

a. Simple Majority Rule c. Simple Minority Rule
b. Majority Rule d. Minority Rule

37. It is an explicit trading of votes on issues of great interest to voters,

mostly voting on more than one issue at a time is
a. Median Voter c. Logrolling
b. Most Preferred Political Outcome d. Median Voter Rule

38. There are transferrable permits to emit a certain amount particular

wastes into the atmosphere or water per year –

a. Coase Rights c. Pollution Control

b. Pollution Rights d. none of the choices

39. This voting rule often allows a minority to decide and it will result in cycling similar to that which
occurs under majority rule –

a. Plurality Rule c. Majority Rule

b. Minority Rule d. None of the Choices

40. The author of our resource book “Public Finance – A Contemporary Application of Theory to
Policy” is authored by –
a. David Hyeman c. David Hyman
b. David Hamyn d. David Hynam

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