Question 1

A free rider

Accepted Answer

A)  Contributes everything to a public good 
B)  Causes a market failure with private goods 
C)  Contributes little or nothing to a public good, but also does not benefit from others' contributions 
D)  Contributes little or nothing to a public good while benefiting from others' contributions 
A)  Contributes everything to a public good 
B)  Causes a market failure with private goods 
C)  Contributes little or nothing to a public good, but also does not benefit from others' contributions 
D)  Contributes little or nothing to a public good while benefiting from others' contributions D

Question 2

An action creates an externality if it

Accepted Answer

A)  Does not affect someone with whom the decision-maker has not engaged in a related market transaction 
B)  Affects someone with whom the decision-maker has not engaged in a related market transaction 
C)  Affects only those individuals engaged in the market transaction 
D)  Affects only those individuals not in the market transaction 
A)  Does not affect someone with whom the decision-maker has not engaged in a related market transaction 
B)  Affects someone with whom the decision-maker has not engaged in a related market transaction 
C)  Affects only those individuals engaged in the market transaction 
D)  Affects only those individuals not in the market transaction B

Question 3

The field of political economy

Accepted Answer

A)  Examines the economic consequences of free markets 
B)  Examines the economic consequences of public sector decision making 
C)  Examines the economic consequences of private sector decision making 
D)  Examines the labor market 
A)  Examines the economic consequences of free markets 
B)  Examines the economic consequences of public sector decision making 
C)  Examines the economic consequences of private sector decision making 
D)  Examines the labor market B

Question 4

Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula   Patrols cost $25 per hour.What is the socially efficient level of security?

Accepted Answer

A)  15 person-hours of patrols per week 
B)  7 person-hours of patrols per week 
C)  8 person-hours of patrols per week 
D)  16 person-hours of patrols per week 
A)  15 person-hours of patrols per week 
B)  7 person-hours of patrols per week 
C)  8 person-hours of patrols per week 
D)  16 person-hours of patrols per week

Question 5

The median voter theorem states that

Accepted Answer

A)  If voters have multi-peaked preferences, all of them prefer the median ideal policy 
B)  If voters have single-peaked preferences, none of them prefer the median ideal policy 
C)  If voters have single-peaked preferences, a majority of them prefer the median ideal policy to all other policies 
D)  If voters have multi-peaked preferences, a majority of them prefer the median of those preferences 
A)  If voters have multi-peaked preferences, all of them prefer the median ideal policy 
B)  If voters have single-peaked preferences, none of them prefer the median ideal policy 
C)  If voters have single-peaked preferences, a majority of them prefer the median ideal policy to all other policies 
D)  If voters have multi-peaked preferences, a majority of them prefer the median of those preferences

Question 6

A private good

Accepted Answer

A)  Is a good for which consumption involves perfect rivalry 
B)  Is completely excludable 
C)  Is often provided by the government 
D)  A and B 
A)  Is a good for which consumption involves perfect rivalry 
B)  Is completely excludable 
C)  Is often provided by the government 
D)  A and B

Question 7

Common property resources include

Accepted Answer

A)  University courses 
B)  Fast food 
C)  Oceans 
D)  Lakes and Movies 
A)  University courses 
B)  Fast food 
C)  Oceans 
D)  Lakes and Movies

Question 8

The marginal social cost of production is

Accepted Answer

A)  The sum of the total cost to the producer and the total external cost 
B)  The sum of the marginal cost to the producer and the total external cost 
C)  The sum of the total cost to the producer and the marginal external cost 
D)  The sum of the marginal cost to the producer and the marginal external cost 
A)  The sum of the total cost to the producer and the total external cost 
B)  The sum of the marginal cost to the producer and the total external cost 
C)  The sum of the total cost to the producer and the marginal external cost 
D)  The sum of the marginal cost to the producer and the marginal external cost

Question 9

The median voter is

Accepted Answer

A)  The voter who has the median income policy among all voters 
B)  The voter who has the median policy among all voters 
C)  The voter who has the average policy among all voters 
D)  The voter who has the mean policy among all voters 
A)  The voter who has the median income policy among all voters 
B)  The voter who has the median policy among all voters 
C)  The voter who has the average policy among all voters 
D)  The voter who has the mean policy among all voters

Question 10

Your neighbor likes to blast 1970's rock music and the louder the better.The loud music imposes a cost on you because it disrupts your study of economics.Let D stand for the volume of his music in decibels,B for his benefits and C for your costs,where B and C are in dollars.For any given volume,D,your neighbor's benefit is   and your cost is   What is the efficient Pigouvian tax?

Accepted Answer

A)  $0.75 per decibel 
B)  $0.29 per decibel 
C)  $0.24 per decibel 
D)  $0.25 per decibel 
A)  $0.75 per decibel 
B)  $0.29 per decibel 
C)  $0.24 per decibel 
D)  $0.25 per decibel

Question 11

A voter's preferences are single-peaked if

Accepted Answer

A)  Her net benefit from an activity increases with the activity's level until her ideal is reached and declines thereafter 
B)  Her total benefit from an activity increases with the activity's level until her ideal is reached and declines thereafter 
C)  Her net benefit from an activity decreases with the activity's level until her ideal is reached and declines thereafter 
D)  Her total benefit from an activity decreases with the activity's level until her ideal is reached and declines thereafter 
A)  Her net benefit from an activity increases with the activity's level until her ideal is reached and declines thereafter 
B)  Her total benefit from an activity increases with the activity's level until her ideal is reached and declines thereafter 
C)  Her net benefit from an activity decreases with the activity's level until her ideal is reached and declines thereafter 
D)  Her total benefit from an activity decreases with the activity's level until her ideal is reached and declines thereafter

Question 12

Activities that create water pollution are considered

Accepted Answer

A)  Inferior goods 
B)  Positive externalities 
C)  Negative externalities 
D)  Normal goods 
A)  Inferior goods 
B)  Positive externalities 
C)  Negative externalities 
D)  Normal goods

Question 13

Explain ways in which the government can remedy an externality.

Accepted Answer

If bargaining breaks down and an efficie

Question 14

Four stores have a problem with theft and security is a public good.Let S stand for the number of person-hours of security patrols per week.The marginal benefit of security patrols to each of the stores is given by the formula   Patrols cost $25 per hour.What is the socially efficient level of security (rounded to the nearest whole number)?

Accepted Answer

A)  88 person-hours of patrols per week 
B)  168 person-hours of patrols per week 
C)  22 person-hours of patrols per week 
D)  97 person-hours of patrols per week 
A)  88 person-hours of patrols per week 
B)  168 person-hours of patrols per week 
C)  22 person-hours of patrols per week 
D)  97 person-hours of patrols per week

Question 15

Three hundred paper mills compete in the paper market.The total cost of production (in dollars)for each mill is given by the formula   ,where Qmill indicates the mills annual production in thousands of tons.The marginal external cost of a mill's production (in dollars)is given by the formula   Finally,annual market demand (in thousands of tons)is given by the formula   Find the efficient quantity that involves no externalities.

Accepted Answer

A)  34,286 
B)  60,000 
C)  1,200 
D)  90,000 
A)  34,286 
B)  60,000 
C)  1,200 
D)  90,000

Question 16

If voters have single-peaked preferences

Accepted Answer

A)  A majority of them prefer the median ideal policy to all other policies 
B)  Majority rule leads to the selection of the median ideal policy 
C)  Majority rule cannot lead to the selection of the median ideal policy 
D)  A and B 
A)  A majority of them prefer the median ideal policy to all other policies 
B)  Majority rule leads to the selection of the median ideal policy 
C)  Majority rule cannot lead to the selection of the median ideal policy 
D)  A and B

Question 17

Pigouvian subsidization

Accepted Answer

A)  Involves the use of taxes or fees to remedy negative externalities 
B)  Involves the use of subsidies to remedy negative externalities 
C)  Is a legal principles requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses 
D)  Requires that victims of an externality pay a tax to the producers of the externality 
A)  Involves the use of taxes or fees to remedy negative externalities 
B)  Involves the use of subsidies to remedy negative externalities 
C)  Is a legal principles requiring a party who takes an action that harms others to compensate the affected parties for some or all of their losses 
D)  Requires that victims of an externality pay a tax to the producers of the externality

Question 18

A beautiful garden that increases the value of the homes in the neighborhood is considered

Accepted Answer

A)  An inferior good 
B)  A positive externality 
C)  A negative externality 
D)  A normal good 
A)  An inferior good 
B)  A positive externality 
C)  A negative externality 
D)  A normal good

Question 19

An external cost is

Accepted Answer

A)  The cost of a warehouse 
B)  A cost of production in some other market 
C)  The economic harm that a positive externality imposes on others 
D)  The economic harm that a negative externality imposes on others 
A)  The cost of a warehouse 
B)  A cost of production in some other market 
C)  The economic harm that a positive externality imposes on others 
D)  The economic harm that a negative externality imposes on others

Question 20

A common property resource is

Accepted Answer

A)  A resource that only one person can use 
B)  A resource that anyone can use for a fixed fee 
C)  A resource that more than one person is free to use without payment 
D)  A resource that only one person can use free of charge 
A)  A resource that only one person can use 
B)  A resource that anyone can use for a fixed fee 
C)  A resource that more than one person is free to use without payment 
D)  A resource that only one person can use free of charge

A free rider

An action creates an externality if it

The field of political economy

The median voter theorem states that

A private good

Common property resources include

The marginal social cost of production is

The median voter is

A voter's preferences are single-peaked if

Activities that create water pollution are considered

Explain ways in which the government can remedy an externality.

If voters have single-peaked preferences

Pigouvian subsidization

A beautiful garden that increases the value of the homes in the neighborhood is considered

An external cost is

A common property resource is

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Filters

Exam 20: Externalities and Public Goods

A free rider

An action creates an externality if it

The field of political economy

The median voter theorem states that

A private good

Common property resources include

The marginal social cost of production is

The median voter is

A voter's preferences are single-peaked if

Activities that create water pollution are considered

Explain ways in which the government can remedy an externality.

If voters have single-peaked preferences

Pigouvian subsidization

A beautiful garden that increases the value of the homes in the neighborhood is considered

An external cost is

A common property resource is

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Time

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Filters