Question

1. What are governments using when they contract with private firms to produce public goods and services?

a.	foreign production to supply the product

b.	domestic production to supply the product

c.	the external organization of government

d.	the internal organization of government

e.	the market to supply the product

2. Social regulation _____

a.	is government regulation of natural monopoly, where, because of economies of scale average production cost is lowest when a single firm supplies the market.

b.is government regulation aimed at preventing monopoly and fostering competition in markets where competition is desirable.

c.	is the ability of a firm to raise the price without losing all its sales to rivals.

d.	tries to improve health and safety, such as by control of unsafe working conditions and dangerous products.

e.	is any firm facing an upward sloping demand curve.

3. Which of the following correctly distinguishes between tax evasion and tax avoidance?

a.	Tax evasion involves taxpayers overstating their incomes, whereas tax avoidance involves taxpayers understating their incomes.

b.	Tax evasion involves taxpayers understating their incomes, whereas tax avoidance involves taxpayers overstating their incomes.

c.	Tax evasion is reported, whereas tax avoidance goes unreported.

d.	Tax evasion is illegal, whereas tax avoidance is legal.

e.	Tax evasion is legal, whereas tax avoidance is illegal.

Answer 1

1. C. the external organization of government

Explanation: Here, the government is contracting public services to external parties.

2. D. tries to improve health and safety, such as by control of unsafe working conditions and dangerous products.

Explanation: Social regulations deal with the controlling the behavior of firms in order to ensure public health and safety concerns

3. D. Tax evasion is illegal, whereas tax avoidance is legal.
Explanation: Tax evasion is not paying a tax which is lawfully due. So, this is illegal. Tax avoidance is managing one's income and investments in such a way to reduce tax burden. This is legal.