Question 1

When people decorate the exteriors of their homes with colored lights, they create ________ for the motorists who pass by.

Accepted Answer

A)  an external benefit 
B)  a competitive good 
C)  a public good 
D)  an excludable good 
A)  an external benefit 
B)  a competitive good 
C)  a public good 
D)  an excludable good

Question 2

Protection of rivers in Idaho is a public good. If the marginal social cost of protecting rivers in Idaho exceeds the marginal social benefit of river protection, is there more than, less than, or the efficient amount of river protection taking place?

Accepted Answer

If the marginal social cost exceeds the

Question 3

If voters are rationally ignorant, then the interest of the bureaucracy to maximize its budget will result in an oversupply of a public good.

Accepted Answer

A) True 
 B)False

Question 4

-Based on the data in the above table, the product exhibits

Accepted Answer

A)  external benefits. 
B)  external costs. 
C)  no externalities. 
D)  increasing returns. 
A)  external benefits. 
B)  external costs. 
C)  no externalities. 
D)  increasing returns.

Question 5

A museum is NOT a public good if

Accepted Answer

A)  there can be no congestion. 
B)  the museum receives donations from members of the public. 
C)  an entry fee is charged and people are denied entry if they do not pay. 
D)  the general public typically does not go to the museum. 
A)  there can be no congestion. 
B)  the museum receives donations from members of the public. 
C)  an entry fee is charged and people are denied entry if they do not pay. 
D)  the general public typically does not go to the museum.

Question 6

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then without government intervention,

Accepted Answer

A)  no students will go to college. 
B)  less than 10 million students will go to college. 
C)  10 million students will go to college. 
D)  more than 10 million students will go to college. 
A)  no students will go to college. 
B)  less than 10 million students will go to college. 
C)  10 million students will go to college. 
D)  more than 10 million students will go to college.

Question 7

Why isn't national defense provided by free markets?

Accepted Answer

National defense is a public good. This

Question 8

The efficient quantity of a public good is the quantity that sets the marginal social benefit from the good equal to the good's marginal social cost.

Accepted Answer

A) True 
 B)False

Question 9

Free riding is possible if the good is nonexcludable.

Accepted Answer

A) True 
 B)False

Question 10

One reason that education has external benefits is that

Accepted Answer

A)  knowledge has diminishing marginal productivity. 
B)  education creates job opportunities for teachers. 
C)  education creates better citizens. 
D)  property owners pay taxes to support the school system. 
A)  knowledge has diminishing marginal productivity. 
B)  education creates job opportunities for teachers. 
C)  education creates better citizens. 
D)  property owners pay taxes to support the school system.

Question 11

The concept of rational ignorance can explain why the government might provide more than the efficient quantity of a public good.

Accepted Answer

A) True 
 B)False

Question 12

-The above figure shows the marginal private benefit and marginal social cost of a college education. If students receive a $10,000 voucher,

Accepted Answer

A)  no students will go to college. 
B)  less than 10 million students will go to college. 
C)  10 million students will go to college. 
D)  more than 10 million students will go to college. 
A)  no students will go to college. 
B)  less than 10 million students will go to college. 
C)  10 million students will go to college. 
D)  more than 10 million students will go to college.

Question 13

Governments exist to

Accepted Answer

A)  maintain property rights. 
B)  provide non-market mechanisms for allocating scarce resources. 
C)  implement arrangements that redistribute wealth and income. 
D)  all of the above 
A)  maintain property rights. 
B)  provide non-market mechanisms for allocating scarce resources. 
C)  implement arrangements that redistribute wealth and income. 
D)  all of the above

Question 14

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium price will be

Accepted Answer

A)  $50 per unit. 
B)  $60 per unit. 
C)  $70 per unit. 
D)  $110 per unit. 
A)  $50 per unit. 
B)  $60 per unit. 
C)  $70 per unit. 
D)  $110 per unit.

Question 15

In the political marketplace, firms do all of the following EXCEPT

Accepted Answer

A)  vote. 
B)  pay taxes. 
C)  evaluate policy proposals of politicians. 
D)  benefit from public goods and services. 
A)  vote. 
B)  pay taxes. 
C)  evaluate policy proposals of politicians. 
D)  benefit from public goods and services.

Question 16

An externality can be a cost or benefit arising from the production of a good that falls upon

Accepted Answer

A)  consumers but not producers. 
B)  producers but not consumers. 
C)  both the consumer and the producer. 
D)  someone other than the consumer or producer. 
A)  consumers but not producers. 
B)  producers but not consumers. 
C)  both the consumer and the producer. 
D)  someone other than the consumer or producer.

Question 17

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient level of college education, tuition is

Accepted Answer

A)  $10,000 per year. 
B)  $12,000 per year. 
C)  $14,000 per year. 
D)  $16,000 per year. 
A)  $10,000 per year. 
B)  $12,000 per year. 
C)  $14,000 per year. 
D)  $16,000 per year.

Question 18

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What is the tuition that will make the number of students equal to the efficient number?

Accepted Answer

A)  $400 
B)  $800 
C)  $2,800 
D)  $3,200 
A)  $400 
B)  $800 
C)  $2,800 
D)  $3,200

Question 19

-The figure above shows the marginal social costs (MSC), marginal private benefits (MB), and marginal social benefits (MSB) of college education in Inland. If Inland's government provides a voucher per student equal to the marginal external benefit of college education, then ________ million students will attend college, and colleges will collect ________ per student from the voucher.

Accepted Answer

A)  0.6; $3,000 
B)  0.8; $5,000 
C)  0.8; $2,000 
D)  0.6; $1,000 
A)  0.6; $3,000 
B)  0.8; $5,000 
C)  0.8; $2,000 
D)  0.6; $1,000

Question 20

-The table above shows the marginal benefit from providing police protection in a community of two people, Jake and Elwood. Police protection is a public good.
a) What is the marginal social benefit to community from the 4th police car on duty?
b) If the marginal social cost of a police car on duty is $37, what is the efficient number of cars on duty?
c) If the marginal social cost of a police car on duty is $70, what is the efficient number of cars on duty?

Accepted Answer

a) The community's marginal social benef

Exam 16: Public Choices and Public Goods

When people decorate the exteriors of their homes with colored lights, they create ________ for the motorists who pass by.

Protection of rivers in Idaho is a public good. If the marginal social cost of protecting rivers in Idaho exceeds the marginal social benefit of river protection, is there more than, less than, or the efficient amount of river protection taking place?

If voters are rationally ignorant, then the interest of the bureaucracy to maximize its budget will result in an oversupply of a public good.

-Based on the data in the above table, the product exhibits

A museum is NOT a public good if

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then without government intervention,

Why isn't national defense provided by free markets?

The efficient quantity of a public good is the quantity that sets the marginal social benefit from the good equal to the good's marginal social cost.

Free riding is possible if the good is nonexcludable.

One reason that education has external benefits is that

The concept of rational ignorance can explain why the government might provide more than the efficient quantity of a public good.

-The above figure shows the marginal private benefit and marginal social cost of a college education. If students receive a $10,000 voucher,

Governments exist to

-In the above table, if the market is perfectly competitive and unregulated, the equilibrium price will be

In the political marketplace, firms do all of the following EXCEPT

An externality can be a cost or benefit arising from the production of a good that falls upon

-The table above shows the marginal costs and marginal benefits of college education. With public provision of the efficient level of college education, tuition is

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What is the tuition that will make the number of students equal to the efficient number?

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

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