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Quiz 3
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1
A public good exhibits the characteristics of:
A)rivalry and excludability
B)nonrivalry and excludability
C)rivalry and nonexcludability
D)nonrivalry and nonexcludability
2
Answer the next question on the basis of the following table, which shows the total benefits and total costs of four progressively larger proposals for a community center for the elderly in a small town. All figures are in thousands of dollars.
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Refer to the table. The marginal benefit of proposal B is:
A)$400,000
B)$600,000
C)$1,400,000
D)$2,200,000
3
Answer the next question on the basis of the following table, which shows the total benefits and total costs of four progressively larger proposals for a community center for the elderly in a small town. All figures are in thousands of dollars.
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Refer to the table. According to this cost-benefit study, how much should the community spend on the senior center?
A)$500,000
B)$1,000,000
C)$1,500,000
D)$2,000,000
4
The Coase Theorem suggests that government intervention is least likely to be needed to correct which of the following externalities?
A)Individuals who outfit their cars with Lojack antitheft devices provide benefits to themselves and other car owners in the community
B)A large brewery discharges its wastewater into a creek, killing many fish a downstream resort relies on to attract anglers
C)Automobiles discharge greenhouse gases that potentially reduce the ozone layer and contribute to global warming
D)Hundreds of ranchers pay below-market rates for their cattle to graze on public land, resulting in overgrazing
5
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
6
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
7
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
8
Many savings and loan institutions failed in the 1980s by making very risky investments. Knowing that their deposits were insured, their depositors did not carefully scrutinize their banks' investment portfolios. This is an example of:
A)adverse selection
B)the Coase Theorem
C)a public good
D)moral hazard
9
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 family medical coverage or increased vacation 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
10
Which of the following best describes the amount of safety provided by employers?
A)Employers have no incentive to provide a safe working environment, because safety increases their costs
B)Asymmetric information will lead to an underallocation of safety by employers
C)Provision of information to employees regarding risk will lead to "too much" job safety provided
D)Competitive labor markets will lead to an underallocation of safety by employers, even with perfect information







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