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Multiple Choice Quiz
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1
The interstate toll roads are collective goods rather than public goods because
A)they are subsidized by general tax revenue.
B)they are limited access excluding those who won't pay.
C)many people can use the same road repeatedly
D)not everyone in the population drives.
2
The demand curve for a public good
A)is the horizontal summation of the demand curves of all citizens.
B)shows how much people desire a public good whether or not they are willing to pay for it.
C)is the vertical summation of each citizen's willingness to pay for the good or service.
D)can be empirically determined by observing voting patterns.
3
Two citizens, the only citizens in the community, have identical willingness to pay curves for a public good. That demand is P = 20 – 2Q. If the marginal cost of providing the public good is 20, how much of the good should the public provide?
A)0
B)5
C)10
D)20
4
In a suburban town the city council contracted with the local paper to have the police throw out the morning papers while they do their routine patrol. The patrolman get paid some more, but the city budget keeps the transportation portion of the paper delivery. This reduced the cost of providing the police protection. It is an example of
A)using club theory to provide the public good of police protection.
B)relying on charity to provide a public good.
C)taxing the paper readers.
D)selling a by-product of a public good.
5
Your student government has three possible projects to emphasize. One third of the students want 1) more movies 2) longer library hours and 3) more parking in that order. Another third of the student body want 1) more parking 2) more movies and 3) longer library hours in that order. Finally the last third of the student body want 1) longer library hours 2) more parking and 3) more movies in that order. You want longer library hours and you will set up the vote. First two issues will be voted on and then the winner will be pitted against the third issue. How will you structure the vote?
A)First movies and parking will be voted on and then the winner of that will face the library issue.
B)First movies and library will be voted on and then the winner of that will face the parking issue.
C)First library and parking will be voted on and then the winner of that will face the movie issue.
D)It doesn't matter because library will lose no matter what.
6
Majority voting would be more efficient if
A)voters could buy and sell their votes on an open market.
B)voters would honestly vote on an intensity scale of -5 to +5.
C)both a and b were possible.
D)neither a or b were possible because majority voting is efficient already.
7
The Tiebout model of public goods
A)works best for people already located in a town rather than at the time when they are exploring a move.
B)is problematic empirically because there is very little variation in public goods provided by communities in a given region.
C)was intended to describe inter rather than intra country migration.
D)is described or critiqued effectively by none of the above.
8
Two firms are seeking a special exporting license that will give them a $1 million economic profit. Only one will get the license. It is likely that
A)they will dissipate the expected profit by competing with each other in a lobbying frenzy for the license.
B)they will collude to share the profits of these favors over time.
C)the government will redo the license agreement if they suspect that economic profits are being made.
D)the firms will recognize the futility of rent seeking and simply hope that they will be awarded the license on the merits of their operation.
9
Students are told to pick their grade out of a hat that has a grade distribution of 5 A, 10 B, 15 C, 10 D, and 5 F. They can change the distribution if they like but they cannot change the overall class grade point average. Following John Rawls' "veil of ignorance" predictions, they invariably
A)choose to leave the distribution as it is.
B)choose to eliminate the F and A grades and sometimes even the B and D grades so everyone gets a C.
C)choose to increase the A grades and the F grades hoping to increase their chances of an A.
D)toss a coin to decide what to do because they are indifferent between any of the above listed options.
10
The "veil of ignorance" referred to in question 18-8 leads to qualifications of marginal productivity theory. The main policy conclusion of this Rawlsian thinking is that
A)society should socialize its citizens in ways that will teach them to work for non-material rewards.
B)public goods should be provided in greater quantity to all citizens.
C)additional inequality will only be justified if it has the effect of raising the income of the poor.
D)there should be an upper limit on income beyond which a 100% tax rate would apply.
11
Which of the following is the least likely to be provided by the government?
A)mosquito control
B)anti terrorist intelligence
C)baseball stadiums
D)July 4th parades down Main Street

Use the following graph for the next five questions.

12

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The vertical intercept of the public good demand shown above is

A)0Y + 0X
B)exogenously given from outside the functions shown.
C)0X + 0X
D)0Y + 0Y + 0Z
13
The optimal provision of the public good will be
A)0
B)0b
C)0c
D)0d
14
If both Karen and Pete are taxed 0Y for each unity of Q and a unanimous vote is required to pass a public provision bill, how much will be provided?
A)0
B)0a
C)0c
D)0d
15
For the optimal amount to be provided by unanimous vote, Pete must be taxed ______ and Karen must be taxed _________.
A)0x, 0y
B)0w, 0
C)0y, 0y
D)0x, 0x
E)None of the above is the right taxing scheme.
16
If the marginal cost were zero of this good and taxes were therefore not needed, how much of the good would be optimal, assuming that Karen gets no negative utility from quantities beyond the quantity she would want at zero price.
A)0d
B)0
C)0b
D)0d + 0c
17
In any majority voting system
A)extremists have the vote go their way.
B)efficient outcomes are the rule.
C)the vote will always be close.
D)the medium voter will always be on the winning side.
18
If I prefer three dips of ice cream, would take two dips as my second choice, or finally settle for one dip is all else fails, then it is true that I have
A)double peaked preferences.
B)single peaked preferences.
C)zero peaked preferences.
D)median voter preferences.
19
If I want the sun to shine today for golfing, would be most upset if a steady drizzle happened, and would prefer heavy rains to the drizzle, it is true that I have
A)double peaked preferences.
B)single peaked preferences.
C)zero peaked preferences.
D)median voter preferences.
20
Which is a practical reason for favoring redistribution of income from the rich to the poor by the government?
A)Rich people benefit more from public goods like defense because they have more to protect.
B)Low incomes lead to discouragement, frustration and sometimes violence.
C)People will accept lower social position in society if they get more income than those lowly positions might pay. When upper class people transfer income to the lower class, social stability is more likely and the rich can retain their social standing.
D)Rich people value their last dollar much less than poor people do so a shift of one dollar from the rich to the poor brings more gain than loss and therefore enhances overall welfare in the system.
E)All of the above make sense as reasons for some form of income redistribution in a society.





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