 |
| 1 | |
Answer the next question on the basis of the following information for a public good. PR and PS are the prices that Rafael and Sarah, respectively, are willing to pay for the marginal unit of a public good, rather than do without it. Rafael and Sarah are the only members of society.
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073365955/627574/q1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (8.0K)</a>]]>
Refer to the table. Suppose the public good can be provided by the government at a constant marginal cost of $7. The optimal quantity of the public good is: |
| | A) | 1 unit |
| | B) | 2 units |
| | C) | 3 units |
| | D) | 4 units |
|
|
|
| 2 | |
Firms will likely provide the economically efficient level of workplace safety if: |
| | A) | monopoly profits provide sufficient resources to cover the cost |
| | B) | workers are constrained from readily changing jobs |
| | C) | wages are inflexible |
| | D) | markets are competitive and workers are informed of safety risks |
|
|
|
| 3 | |
Coase's assertion that government intervention is not necessary to resolve situations of negative externalities does not apply in situations where: |
| | A) | property rights are not clearly established |
| | B) | markets are competitive |
| | C) | bargaining between the affected parties is costless |
| | D) | there are only a few affected parties |
|
|
|
| 4 | |
Answer the next question on the basis of the following information for four city beautification programs of increasing scope. All figures are in millions of dollars.
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073365955/627574/q4.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>]]>
Refer to the table. On economic grounds, the most efficient program is: |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
|
|
|
| 5 | |
Government has imposed a tax on the producers of good X and has subsidized the consumers of good Y. If these policies result in the production of the efficient amounts of both goods, it is likely the government is correcting for: |
| | A) | external costs in producing X and external benefits in consuming Y |
| | B) | external benefits in producing X and external costs in consuming Y |
| | C) | external benefits in producing X and consuming Y |
| | D) | external costs in producing X and consuming Y |
|
|
|
| 6 | |
Provisions of the Clean Air Act of 1990 that required 30 to 60 percent reduction of tailpipe emissions in cars were an example of: |
| | A) | market policies to correct for an external benefit |
| | B) | direct controls to correct for an external cost |
| | C) | an application of the Coase Theorem |
| | D) | direct controls to correct for moral hazard |
|
|
|
| 7 | |
The primary benefit of a market for pollution rights is that such markets: |
| | A) | typically are the only way to reduce pollution to zero |
| | B) | force the worst polluters to clean up the most |
| | C) | typically are the only way to reduce the adverse selection problem |
| | D) | reduce the total costs of achieving a given level of pollution reduction |
|
|
|
| 8 | |
Considering a market for pollution rights, the discovery of a new, cleaner, inexpensive technology for the production of energy would: |
| | A) | reduce the supply of pollution permits |
| | B) | increase the price of pollution permits |
| | C) | reduce the demand for pollution permits |
| | D) | increase the quantity of pollution permits |
|
|
|
| 9 | |
Which of the following is a likely benefit of slowing or eliminating the greenhouse effect? |
| | A) | A reduction in the cost of making required economic adjustments to higher global temperatures |
| | B) | Increased per-capital consumption of fossil fuels |
| | C) | A reduction in the rate of economic growth |
| | D) | Warmer temperatures in the summer months |
|
|
|
| 10 | |
Which of the following best exemplifies the moral hazard problem? |
| | A) | Kevin, who knows his new car is a lemon, attempts to sell it to an unsuspecting buyer |
| | B) | Given the choice of better family medical coverage or increased paid time away in the company's benefits program, Kelsey selects the former |
| | C) | After buying the extended coverage on her rental car agreement, Melissa drives more recklessly than she would in her own car |
| | D) | David watches his favorite shows on public television, but never contributes to their pledge drives |
|
|
.