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| 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 are willing to pay for the last unit of a public good, rather than do without it. Rafael and Sarah are the only members of society.
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Refer to the table. The collective willingness of this society to pay for the third unit of this public good is: |
| | A) | $5 |
| | B) | $6 |
| | C) | $11 |
| | D) | $43 |
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| 2 | |
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 are willing to pay for the last unit of a public good, rather than do without it. Rafael and Sarah are the only members of society.
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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 |
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| 3 | |
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 |
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| 4 | |
With open access, ranchers' cattle stocks tended to overgraze federal land in the Western United States. This is an example of: |
| | A) | the Coase Theorem |
| | B) | the tragedy of the commons |
| | C) | adverse selection |
| | D) | moral hazard |
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| 5 | |
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 |
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| 6 | |
The law of diminishing returns suggests that: |
| | A) | the marginal cost of pollution abatement curve is downward sloping |
| | B) | the marginal cost of pollution abatement curve is upward sloping |
| | C) | the marginal benefit of pollution abatement curve is downward sloping |
| | D) | the marginal benefit of pollution abatement curve is upward sloping |
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| 7 | |
Which of the following markets is likely to be characterized by substantial positive externalities? |
| | A) | Flu vaccine |
| | B) | Salmon |
| | C) | Newsprint |
| | D) | Concrete |
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| 8 | |
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.
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Refer to the table. In millions of dollars, the marginal cost and marginal benefit of plan D, respectively, are: |
| | A) | $180 and $140 |
| | B) | $100 and $120 |
| | C) | $160 and $90 |
| | D) | $80 and $20 |
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| 9 | |
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.
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Refer to the table. On economic grounds, the most efficient program is: |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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| 10 | |
Answer the next question on the basis of the following diagram.
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Refer to the diagram. Suppose society's initial marginal benefit and marginal cost of pollution abatement curves are given by MB1 and MC1, respectively, and society is achieving the optimal amount of pollution abatement. If the MC curve shifts from MC1 to MC2: |
| | A) | competitive markets for the final product will automatically push the economy to Q3 |
| | B) | the efficient amount of pollution abatement will increase |
| | C) | the market will generate too much pollution abatement activity |
| | D) | the MB will automatically shift from MB1 to MB2 |
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