Question 1

In the United States, public sector purchases of goods and services:

Accepted Answer

A)  amount to about 33 percent of GDP. 
B)  amount to about 15 percent of GDP. 
C)  amount to about 29 percent of GDP. 
D)  amount to about 10 percent of GDP. 
E)  are not included in the calculation of GDP. 
A)  amount to about 33 percent of GDP. 
B)  amount to about 15 percent of GDP. 
C)  amount to about 29 percent of GDP. 
D)  amount to about 10 percent of GDP. 
E)  are not included in the calculation of GDP. C

Question 2

Economists consider a pure public good to be indivisible if it is difficult or impossible to keep it from consumers who do not pay for it.

Accepted Answer

A) True 
 B)False  False

Question 3

The benefit-cost ratio for an activity is equal to:

Accepted Answer

A)  the total value of its benefits divided by the total value of its cost. 
B)  the marginal private benefits the good provides less any additional external or third-party benefits. 
C)  the present value of its benefits divided by the present value of its cost. 
D)  the marginal private benefits the good provides divided by any additional external or third-party costs. 
E)  the present value of its benefits less the present value of its cost. 
A)  the total value of its benefits divided by the total value of its cost. 
B)  the marginal private benefits the good provides less any additional external or third-party benefits. 
C)  the present value of its benefits divided by the present value of its cost. 
D)  the marginal private benefits the good provides divided by any additional external or third-party costs. 
E)  the present value of its benefits less the present value of its cost. C

Question 4

To maximize the net social benefit received from a good or service, it should be produced up to the point where its total social benefit is equal to its total social cost.

Accepted Answer

A) True 
 B)False

Question 5

All of the following would be considered a direct cost of a public good EXCEPT:

Accepted Answer

A)  initial capital outlay. 
B)  research and planning outlays. 
C)  maintenance expenses over the life of the project. 
D)  disruption of traffic caused by subway construction. 
E)  operating expenses over the life of the project. 
A)  initial capital outlay. 
B)  research and planning outlays. 
C)  maintenance expenses over the life of the project. 
D)  disruption of traffic caused by subway construction. 
E)  operating expenses over the life of the project.

Question 6

City Council member Alfred Garcia has proposed a new airport facility. The airport facility would provide the city with $200,000 in net cash flow landing fees, rent, etc.) and would cost $1,900,000. The city's Planning Department normally uses a 10% discount rate when evaluating capital projects. Should the city council adopt Garcia's proposal if the project has a 20 year life? Why or why not?

Accepted Answer

PV of $200,000 at 10% for 20 y

Question 7

The State Legislature is attempting to choose two projects from the following:
   
If the state uses a discount rate of 6% and all the above projects are estimated to have a life of 20 years, the Legislature should accept Project C.

Accepted Answer

A) True 
 B)False

Question 8

The net social benefit of a good is equal to its total social benefit less its total social cost.

Accepted Answer

A) True 
 B)False

Question 9

To maximize the net social benefit received from a good or service, it should be produced up to the point where:

Accepted Answer

A)  total social benefit is equal to its total social cost. 
B)  its marginal private benefit is equal to its marginal social cost. 
C)  its marginal social benefit is equal to its marginal social cost. 
D)  its marginal social benefit is equal to its marginal private cost. 
E)  its marginal private benefit is equal to its marginal private cost. 
A)  total social benefit is equal to its total social cost. 
B)  its marginal private benefit is equal to its marginal social cost. 
C)  its marginal social benefit is equal to its marginal social cost. 
D)  its marginal social benefit is equal to its marginal private cost. 
E)  its marginal private benefit is equal to its marginal private cost.

Question 10

The marginal social cost of a good is equal to any marginal external costs imposed on third parties by its production.

Accepted Answer

A) True 
 B)False

Question 11

The benefit-cost ratio B/C) for an activity is equal to the present value of its benefits divided by the present value of its cost.

Accepted Answer

A) True 
 B)False

Question 12

The marginal social cost of a good reflects the value of resources used in its production.

Accepted Answer

A) True 
 B)False

Question 13

The benefit-cost ratio B/C) for an activity is equal to the total value of its benefits divided by the total value of its cost.

Accepted Answer

A) True 
 B)False

Question 14

In calculating costs of a public investment project, indirect costs are always difficult to estimate because of their partly nonmarket nature.

Accepted Answer

A) True 
 B)False

Question 15

One of the pitfalls of cost-benefit analysis is that the sheer cost of performing a credible cost-benefit analysis makes the approach unfeasible for many public investment decisions.

Accepted Answer

A) True 
 B)False

Question 16

Economists consider a pure public good to be nonexcludable if:

Accepted Answer

A)  it is difficult but not impossible to keep it from consumers who do not pay for it. 
B)  it is difficult or impossible to keep it from consumers who do not pay for it. 
C)  it is difficult but not impossible for one person to consume a unit of it apart from other units. 
D)  one person cannot consume a unit of it apart from other units. 
E)  one person cannot keep it from consumers who do not pay for it. 
A)  it is difficult but not impossible to keep it from consumers who do not pay for it. 
B)  it is difficult or impossible to keep it from consumers who do not pay for it. 
C)  it is difficult but not impossible for one person to consume a unit of it apart from other units. 
D)  one person cannot consume a unit of it apart from other units. 
E)  one person cannot keep it from consumers who do not pay for it.

Question 17

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 9%?

Accepted Answer

A)  A only 
B)  B only 
C)  A & B 
D)  A & C 
E)  B & C 
A)  A only 
B)  B only 
C)  A & B 
D)  A & C 
E)  B & C

Question 18

Economists consider a pure public good to be non-excludable if it is difficult or impossible to keep it from consumers who do not pay for it.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 6%?

Accepted Answer

Project A:

Question 20

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 6%?

Accepted Answer

A)  A only 
B)  B only 
C)  A & B 
D)  A & C 
E)  B & C 
A)  A only 
B)  B only 
C)  A & B 
D)  A & C 
E)  B & C

In the United States, public sector purchases of goods and services:

Economists consider a pure public good to be indivisible if it is difficult or impossible to keep it from consumers who do not pay for it.

The benefit-cost ratio for an activity is equal to:

To maximize the net social benefit received from a good or service, it should be produced up to the point where its total social benefit is equal to its total social cost.

All of the following would be considered a direct cost of a public good EXCEPT:

The State Legislature is attempting to choose two projects from the following: If the state uses a discount rate of 6% and all the above projects are estimated to have a life of 20 years, the Legislature should accept Project C.

The net social benefit of a good is equal to its total social benefit less its total social cost.

To maximize the net social benefit received from a good or service, it should be produced up to the point where:

The marginal social cost of a good is equal to any marginal external costs imposed on third parties by its production.

The benefit-cost ratio B/C) for an activity is equal to the present value of its benefits divided by the present value of its cost.

The marginal social cost of a good reflects the value of resources used in its production.

The benefit-cost ratio B/C) for an activity is equal to the total value of its benefits divided by the total value of its cost.

In calculating costs of a public investment project, indirect costs are always difficult to estimate because of their partly nonmarket nature.

One of the pitfalls of cost-benefit analysis is that the sheer cost of performing a credible cost-benefit analysis makes the approach unfeasible for many public investment decisions.

Economists consider a pure public good to be nonexcludable if:

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 9%?

Economists consider a pure public good to be non-excludable if it is difficult or impossible to keep it from consumers who do not pay for it.

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 6%?

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 6%?

Introduction, Basic Principles, and Methodology

Revenue of the Firm

Topics in Demand Analysis and Estimation

Economic Forecasting

Production Analysis

Cost of Production

Profit Analysis of the Firm

Perfect Competition and Monopoly

Monopolistic Competition and Oligopoly

Games, Information and Strategy

Topics in Pricing and Profit Analysis

Factor Markets

Fundamentals of Project Evaluation

Risk in Project Analysis

Legal and Regulatory Environment of the Firm

Filters

Exam 15: Economics of Public Sector Decisions

In the United States, public sector purchases of goods and services:

Economists consider a pure public good to be indivisible if it is difficult or impossible to keep it from consumers who do not pay for it.

The benefit-cost ratio for an activity is equal to:

To maximize the net social benefit received from a good or service, it should be produced up to the point where its total social benefit is equal to its total social cost.

All of the following would be considered a direct cost of a public good EXCEPT:

The State Legislature is attempting to choose two projects from the following: If the state uses a discount rate of 6% and all the above projects are estimated to have a life of 20 years, the Legislature should accept Project C.

The net social benefit of a good is equal to its total social benefit less its total social cost.

To maximize the net social benefit received from a good or service, it should be produced up to the point where:

The marginal social cost of a good is equal to any marginal external costs imposed on third parties by its production.

The benefit-cost ratio B/C) for an activity is equal to the present value of its benefits divided by the present value of its cost.

The marginal social cost of a good reflects the value of resources used in its production.

The benefit-cost ratio B/C) for an activity is equal to the total value of its benefits divided by the total value of its cost.

In calculating costs of a public investment project, indirect costs are always difficult to estimate because of their partly nonmarket nature.

One of the pitfalls of cost-benefit analysis is that the sheer cost of performing a credible cost-benefit analysis makes the approach unfeasible for many public investment decisions.

Economists consider a pure public good to be nonexcludable if:

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 9%?

Economists consider a pure public good to be non-excludable if it is difficult or impossible to keep it from consumers who do not pay for it.

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 6%?

Which of the following projects would be acceptable from a cost-benefit standpoint if the applicable discount rate is 6%?

Introduction, Basic Principles, and Methodology

Revenue of the Firm

Topics in Demand Analysis and Estimation

Economic Forecasting

Production Analysis

Cost of Production

Profit Analysis of the Firm

Perfect Competition and Monopoly

Monopolistic Competition and Oligopoly

Games, Information and Strategy

Topics in Pricing and Profit Analysis

Factor Markets

Fundamentals of Project Evaluation

Risk in Project Analysis

Legal and Regulatory Environment of the Firm

Filters