Question 1

-In the above figure, to achieve efficiency, the government should

Accepted Answer

A)  impose a tax of $2 per unit. 
B)  impose a tax of $3 per unit. 
C)  offer a subsidy of $2 per unit. 
D)  offer a subsidy of $3 per unit. 
A)  impose a tax of $2 per unit. 
B)  impose a tax of $3 per unit. 
C)  offer a subsidy of $2 per unit. 
D)  offer a subsidy of $3 per unit.

Question 2

If the marginal social benefit of a city's sewage system is less than the marginal social cost, then the city will achieve an efficient use of resources if it ________.

Accepted Answer

A)  decreases the capacity of the sewage system 
B)  does not change the capacity of the sewage system 
C)  increases the capacity of the sewage system 
D)  increases the sewerage charge that the residents pay 
A)  decreases the capacity of the sewage system 
B)  does not change the capacity of the sewage system 
C)  increases the capacity of the sewage system 
D)  increases the sewerage charge that the residents pay

Question 3

The fact that you may not know who your congressional representative is represents

Accepted Answer

A)  rational ignorance on your part. 
B)  the rival nature of information. 
C)  inefficient oversupply of public servants. 
D)  the use of the median voter theorem. 
A)  rational ignorance on your part. 
B)  the rival nature of information. 
C)  inefficient oversupply of public servants. 
D)  the use of the median voter theorem.

Question 4

Rational ignorance means

Accepted Answer

A)  ignorance is rationed. 
B)  the benefit from some information is not worth the cost of collecting it. 
C)  some people do not understand rationality. 
D)  the information is unavailable. 
A)  ignorance is rationed. 
B)  the benefit from some information is not worth the cost of collecting it. 
C)  some people do not understand rationality. 
D)  the information is unavailable.

Question 5

An externality occurs when

Accepted Answer

A)  the costs of producing a good are paid entirely by the producer. 
B)  some of the costs of producing a good are paid by someone other than the producer. 
C)  the marginal social cost of an activity increases as that activity is increased. 
D)  Both answers A and C are correct. 
A)  the costs of producing a good are paid entirely by the producer. 
B)  some of the costs of producing a good are paid by someone other than the producer. 
C)  the marginal social cost of an activity increases as that activity is increased. 
D)  Both answers A and C are correct.

Question 6

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition?

Accepted Answer

A)  $4,000 
B)  $8,000 
C)  $12,000 
D)  $16,000 
A)  $4,000 
B)  $8,000 
C)  $12,000 
D)  $16,000

Question 7

Which of the following methods is used by the government to ensure that an efficient level of college education is achieved? I. Below-cost provision
II) Allowing everyone to free ride

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 8

Suppose that recycling rubber for sneakers creates an external benefit of $2.00 per ton of rubber. There are no external costs. The efficient amount of rubber will be recycled when the government creates a

Accepted Answer

A)  subsidy of more than $2.00 per ton of rubber. 
B)  subsidy of $2.00 per ton of rubber. 
C)  tax of more than $2.00 per ton of rubber. 
D)  tax of $2.00 per ton of rubber. 
A)  subsidy of more than $2.00 per ton of rubber. 
B)  subsidy of $2.00 per ton of rubber. 
C)  tax of more than $2.00 per ton of rubber. 
D)  tax of $2.00 per ton of rubber.

Question 9

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant.
-In the figure above, if the government gives a voucher equal to $3,000 per year to each college student, how many students will be accepted?

Accepted Answer

A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  14 million per year 
A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  14 million per year

Question 10

An example of a good that is both rival and excludable is

Accepted Answer

A)  the defense services provided by a new stealth bomber. 
B)  a pair of pants. 
C)  a beautiful sunset. 
D)  an uncrowded theme park such as Walt Disney World. 
A)  the defense services provided by a new stealth bomber. 
B)  a pair of pants. 
C)  a beautiful sunset. 
D)  an uncrowded theme park such as Walt Disney World.

Question 11

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant.
-In the figure above, if the government provides the efficient amount of education, how many students will be accepted?

Accepted Answer

A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  16 million per year 
A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  16 million per year

Question 12

-The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is

Accepted Answer

A)  zero. 
B)  $4,000. 
C)  $5,000. 
D)  $7,000. 
A)  zero. 
B)  $4,000. 
C)  $5,000. 
D)  $7,000.

Question 13

-In the above table, the efficient level of output is

Accepted Answer

A)  2,000 units. 
B)  3,000 units. 
C)  4,000 units. 
D)  5,000 units. 
A)  2,000 units. 
B)  3,000 units. 
C)  4,000 units. 
D)  5,000 units.

Question 14

-Broomfield city council is deciding how many police officers the city needs. Broomfield's population is 10,000 people. The marginal cost of a police officer is $60,000 per year. The marginal benefit schedule of an average city resident from police protection is shown in the table above. Police protection is a public good. If voters in Broomfield are well informed and know what is best for them, the political equilibrium is that ________ police officers will be hired.

Accepted Answer

A)  2 
B)  4 
C)  6 
D)  3 
A)  2 
B)  4 
C)  6 
D)  3

Question 15

Every year as the clock nears midnight on December 31st, the eyes of the world turn to Times Square in New York City to watch the famous ball drop at midnight. The event is open to everyone, but it is advised you arrive early to participate because the square quickly becomes crowded with no space left for latecomers. This celebration can be classified as

Accepted Answer

A)  rival and excludable. 
B)  non-rival and non-excludable. 
C)  non-rival and excludable. 
D)  rival and non-excludable. 
A)  rival and excludable. 
B)  non-rival and non-excludable. 
C)  non-rival and excludable. 
D)  rival and non-excludable.

Question 16

-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What is the marginal social benefit from education?

Accepted Answer

A)  It depends on the demand. 
B)  $20,000 
C)  $10,000 
D)  $40,000 
A)  It depends on the demand. 
B)  $20,000 
C)  $10,000 
D)  $40,000

Question 17

-Ten homeowners live around Lake Alice. Unfortunately, the lake is contaminated with various chemicals and the level of contamination is currently 20 parts per million. All the homeowners benefit equally if the level of contamination is reduced. The table above gives the marginal social cost and marginal social benefit for removing the contaminants from the lake. Cleaning the lake is a public good.
a) What will be the parts per million if the homeowners alone are in charge of reducing the contaminants?
b) What is the efficient amount of contamination?

Accepted Answer

a) Homeowners will not reduce the contam

Question 18

A public choice is

Accepted Answer

A)  a decision that affects one person. 
B)  a decision that affects no one. 
C)  a decision made in public. 
D)  a decision that affects an entire society. 
A)  a decision that affects one person. 
B)  a decision that affects no one. 
C)  a decision made in public. 
D)  a decision that affects an entire society.

Question 19

Explain why some amount of ignorance can be rational.

Accepted Answer

Acquiring information is not costless. T

Question 20

Because of voter rational ignorance, the government might not produce the efficient quantity of a public good.

Accepted Answer

A) True 
 B)False

-In the above figure, to achieve efficiency, the government should

If the marginal social benefit of a city's sewage system is less than the marginal social cost, then the city will achieve an efficient use of resources if it ________.

The fact that you may not know who your congressional representative is represents

Rational ignorance means

An externality occurs when

Which of the following methods is used by the government to ensure that an efficient level of college education is achieved? I. Below-cost provision II) Allowing everyone to free ride

Suppose that recycling rubber for sneakers creates an external benefit of $2.00 per ton of rubber. There are no external costs. The efficient amount of rubber will be recycled when the government creates a

An example of a good that is both rival and excludable is

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government provides the efficient amount of education, how many students will be accepted?

-The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is

-In the above table, the efficient level of output is

A public choice is

Explain why some amount of ignorance can be rational.

Because of voter rational ignorance, the government might not produce the efficient quantity of a public good.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

Exam 16: Public Choices and Public Goods

-In the above figure, to achieve efficiency, the government should

If the marginal social benefit of a city's sewage system is less than the marginal social cost, then the city will achieve an efficient use of resources if it ________.

The fact that you may not know who your congressional representative is represents

Rational ignorance means

An externality occurs when

Which of the following methods is used by the government to ensure that an efficient level of college education is achieved? I. Below-cost provision II) Allowing everyone to free ride

Suppose that recycling rubber for sneakers creates an external benefit of $2.00 per ton of rubber. There are no external costs. The efficient amount of rubber will be recycled when the government creates a

An example of a good that is both rival and excludable is

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government provides the efficient amount of education, how many students will be accepted?

-The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is

-In the above table, the efficient level of output is

A public choice is

Explain why some amount of ignorance can be rational.

Because of voter rational ignorance, the government might not produce the efficient quantity of a public good.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters