Question 1

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease. 
One reason ____ children should be immunized is that

Accepted Answer

A) all;there are social benefits in addition to private benefits. 
B) fewer than 150;immunizations pose risks. 
C) fewer than all;medical care resources are scarce. 
D) 100;that is the number at which marginal benefits equal marginal cost.

Question 2

The amount of waste caused by full insurance coverage depends on

Accepted Answer

A) the individual who is covered by the insurance plan. 
B) the price elasticity of demand for medical service. 
C) the price elasticity of supply of medical service. 
D) whether people care about the equitable distribution of care.

Question 3

When state regulators require consumers to purchase and use a safety device,the regulation

Accepted Answer

A) always reduces total economic surplus. 
B) has an ambiguous effect on total economic surplus,depending on whether the regulation infringes on personal liberty. 
C) does not reduce total economic surplus if the marginal cost of providing the last device purchased is equal to the marginal social benefit of that device. 
D) increases total economic surplus if the government subsidizes the purchase.

Question 4

When Dale visits the doctor,Dale does not pay for either the visit or any tests the doctor may order.Dale must therefore

Accepted Answer

A) be a member of an HMO. 
B) have a medical insurance policy with a deductible. 
C) have first-dollar medical insurance. 
D) be underutilizing medical care.

Question 5

The system of government insurance that pays benefits to workers injured on the job is referred to as

Accepted Answer

A) social security. 
B) welfare. 
C) OSHA. 
D) workers' compensation.

Question 6

The growth of lawsuits seeking compensation from firms when a worker is injured should serve to

Accepted Answer

A) reduce the firm's incentive to improve safety. 
B) increase the worker's incentive to get injured. 
C) increase the firms' incentive to improve safety. 
D) reduce moral hazard.

Question 7

Suppose that there are three power-generating plants,all of which generate emissions.The table summarizes the cost of emission reduction for each firm given five different levels of pollution: $$\begin{array} { l l l l l r } 
\text { Tons of smoke emitted per day } & 4 & 3 & 2 & 1 & 0 \
\text { Total abatement cost, firm A } & 0 & \$ 14 & \$ 30 & \$ 50 & \$ 75 \
\text { Total abatement cost, firm B } & 0 & \$ 20 & \$ 45 & \$ 80 & \$ 120 \
\text { Total abatement cost, firm C } & 0 & \$ 25 & \$ 60 & \$ 100 & \$ 150
\end{array}$$
Suppose the government requires the three firms to reduce pollution to 2 tons of smoke per day,for a total of 6 tons.This will result in a total cost of __________.

Accepted Answer

A) $59 
B) $42 
C) $230 
D) $135

Question 8

Two firms can choose from five different technologies to reduce their pollution: A,B,C,D and E.The amount of pollution emitted by each technology and the cost of the technologies are shown in the table.Both firms have adopted technology A and currently emit 4 tons apiece.The government is considering two plans to reduce pollution: a 50% reduction by both firms or selling pollution permits.One permit entitles the owner to emit one ton of pollution.Without a permit,no pollution can be emitted.
$$\begin{array} { l c c c c c } 
& \mathrm { A } : & \mathrm { B } : & \mathrm { C } : & \mathrm { D } : & \mathrm { E } : \
& 4 \text { tons } & 3 \text { tons } & 2 \text { tons } & 1 \text { ton } & \text { no pollution } \
\text { Industrio } & \$ 350 & \$ 400 & \$ 500 & \$ 700 & \$ 1000 \
\text { Capitalista } & \$ 225 & \$ 250 & \$ 290 & \$ 400 & \$ 600
\end{array}$$
Suppose a permit system has been adopted and each firm has already purchased one permit.Industrio would be willing to pay up to ___ for the right to discharge a second ton of pollution,and Capitalista would be willing to pay up to __ for the right to discharge a second ton of pollution.

Accepted Answer

A) $200;$300 
B) $200;$110 
C) $100;$40 
D) $500;$290

Question 9

The effect of widespread insurance covering routine medical care is to reduce the

Accepted Answer

A) equilibrium amount of routine medical care. 
B) marginal benefit of routine medical care to the insured. 
C) marginal cost of routine medical care to the insured. 
D) total cost of routine medical care to the insured.

Question 10

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB1 and at the museum is given by MB2.All values are per week. 
An increase in crime would

Accepted Answer

A) shift the marginal cost curve from MC to either MC1 or MC2. 
B) reduce the differences between each marginal benefit curve. 
C) shift marginal benefit curves to the left. 
D) shift marginal benefit curves to the right.

Question 11

A group of physicians that provide healthcare services to members for a fixed annual fee is termed a

Accepted Answer

A) health management organization. 
B) fee-for-service plan. 
C) partnership. 
D) health maintenance organization.

Question 12

Suppose a treacherous stretch of road winds through Deadman's Canyon for 5 miles.A highway department study estimates that better lighting would reduce the traffic fatality rates as follows: $$\begin{array} { c c c } 
\text { Number of lights } & \text { Estimated deaths per year } & \text { Total installation cost (in millions) } \
0 & 3 & \$ 0 \mathrm {~m} \
1 & 2 & \$ 3 \mathrm {~m} \
2 & 1.5 & \$ 7 \mathrm {~m} \
3 & 1.2 & \$ 12 \mathrm {~m} \
4 & 1 & \$ 18 \mathrm {~m} \
5 & 0.9 & \$ 25 \mathrm {~m}
\end{array}$$
Suppose that experts have estimated the statistical value of a life saved to be $8m.The marginal benefit of the third light installed is ____ and the marginal cost is ____.Therefore the third light ____ be installed.

Accepted Answer

A) $2.4m;$5m;should not 
B) $8m;$5m;should 
C) $300,000;$5m;should not 
D) $500,000;$1m;should not

Question 13

Your state is considering enacting a law requiring that all motorcycle operators and their passengers wear a helmet.Motorcyclists vary in the degree to which they value being able to ride helmet-less and in the extent to which they value the safety provided by a helmet.
The regulation requiring helmets is more likely to enhance efficiency when

Accepted Answer

A) motorcycle accidents impose external costs. 
B) motorcycle accidents do not impose external costs. 
C) motorcyclists as a group are more risk averse than average. 
D) motorcyclists as a group are less risk averse than average.

Question 14

Two firms can use five different technologies to produce the same quantity of output: 1,2,3,4 and 5.The first technology is the cheapest,but also the dirtiest.The fifth technology is the most expensive,but results in the lowest levels of pollution.The amount of pollution emitted by each firm and the cost of the technologies are shown in the table. $$\begin{array} { l r l l l l } 
\text { Technology } & 1 & 2 & 3 & 4 & 5 \
\text { Emissions } & 10 \text { tons } & 8 \text { tons } & 6 \text { tons } & 4 \text { tons } & 2 \text { tons } \
\text { Acme's Costs } & \$ 750 & \$ 800 & \$ 1000 & \$ 1400 & \$ 2000 \
\text { FirmCo's Costs } & \$ 500 & \$ 700 & \$ 1200 & \$ 2200 & \$ 4000
\end{array}$$
In the absence of either government regulation or private negotiation,the 2 firms will produce using technology __________ and pollution will be __________.

Accepted Answer

A) 3;12 tons 
B) 5;4 tons 
C) 2;16 tons 
D) 1;20 tons

Question 15

The growth of medical insurance in general and first-dollar coverage specifically has reduced the marginal cost of treatment paid by the consumer.Therefore,the current level of medical treatment in the United States is

Accepted Answer

A) equal to the efficient level. 
B) less than the efficient level. 
C) greater than the efficient level. 
D) less than or equal to the efficient level.

Question 16

Suppose a treacherous stretch of road winds through Deadman's Canyon for 5 miles.A highway department study estimates that better lighting would reduce the traffic fatality rates as follows: $$\begin{array} { c c c } 
\text { Number of lights } & \text { Estimated deaths per year } & \text { Total installation cost (in millions) } \
0 & 3 & \$ 0 \mathrm {~m} \
1 & 2 & \$ 3 \mathrm {~m} \
2 & 1.5 & \$ 7 \mathrm {~m} \
3 & 1.2 & \$ 12 \mathrm {~m} \
4 & 1 & \$ 18 \mathrm {~m} \
5 & 0.9 & \$ 25 \mathrm {~m}
\end{array}$$
Highway engineers have identified one level area in which one light could be located,but due to the rough terrain installation in additional locations is increasingly costly as more light locations are added.The highway department

Accepted Answer

A) should put the first light in a difficult-to-access location while they still have sufficient budget to cover installation. 
B) should apply the low-hanging-fruit principle. 
C) must install the maximum number of lights because they have been shown to save lives. 
D) should use non-monetary criteria to decide on light location.

Question 17

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB1 and at the museum is given by MB2.All values are per week. 
The marginal cost of providing security cameras would shift from MC to MC1 if

Accepted Answer

A) a natural disaster increased the value of security cameras in a neighboring town. 
B) technological advances made it easier to monitor multiple cameras from a single location. 
C) more firms began substituting cameras for live security guards. 
D) a crime wave increased the demand for security.

Question 18

Suppose Marion and Gab must both choose between two jobs,a safe job that pays $250/week and a risky job that pays $300/week.The value of safety to each is $75/week.Each also values having a higher income than the other at $75/week.Having the same job (income)as the other means no change in satisfaction.The following payoff matrix shows the income (satisfaction)each would get based on the other decision. $\begin{array}{c}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Marion }\
\text { Gab }
\begin{array}{|l|l|l|}
\hline& \text { Safe Job @ \$250 } & \text { Risky Job @ \$300 } \
\hline \text { Safe Job @ \$250 } & \begin{array}{l}
\text { Gab: \$325 } \
\text { Marion: \$325 }
\end{array} & \text { Gab: \$325 } \
& \text { Marion: \$375 } \
\hline \text { Risky Job @ \$300 } & \begin{array}{l}
\text { Gab: \$375 } \
\text { Marion: \$325 }
\end{array} & \begin{array}{l}
\text { Gab: \$300 } \
\text { Marion: \$300 }
\end{array} \
\hline
\end{array}\end{array}$
When Marion chooses the safe job,Gab will get more satisfaction by choosing the ____ and when Marion chooses the risky job,Gab will get more satisfaction by choosing the _____.

Accepted Answer

A) risky job;risky job 
B) risky job;safe job 
C) safe job;risky job 
D) safe job;safe job

Question 19

To achieve the socially optimal workplace injury rate,

Accepted Answer

A) strict government regulation is necessary. 
B) workers must be educated about potential safety risks at work. 
C) workers' compensation premiums must accurately reflect the firm's injury rate. 
D) certain high risk jobs must be eliminated.

Question 20

One difficulty with the exploitation view of workplace injuries is for it to be successful over time,firms must

Accepted Answer

A) act collusively. 
B) profit maximize. 
C) act independently. 
D) encourage worker mobility.

Exam 13: The Environment, Health, and Safety

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease. One reason ____ children should be immunized is that

The amount of waste caused by full insurance coverage depends on

When state regulators require consumers to purchase and use a safety device,the regulation

When Dale visits the doctor,Dale does not pay for either the visit or any tests the doctor may order.Dale must therefore

The system of government insurance that pays benefits to workers injured on the job is referred to as

The growth of lawsuits seeking compensation from firms when a worker is injured should serve to

The effect of widespread insurance covering routine medical care is to reduce the

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB₁ and at the museum is given by MB₂.All values are per week. An increase in crime would

A group of physicians that provide healthcare services to members for a fixed annual fee is termed a

The growth of medical insurance in general and first-dollar coverage specifically has reduced the marginal cost of treatment paid by the consumer.Therefore,the current level of medical treatment in the United States is

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB₁ and at the museum is given by MB₂.All values are per week. The marginal cost of providing security cameras would shift from MC to MC₁ if

To achieve the socially optimal workplace injury rate,

One difficulty with the exploitation view of workplace injuries is for it to be successful over time,firms must

Exam 13: The Environment, Health, and Safety

This graph illustrates the marginal cost,marginal private benefit,and marginal social benefit of immunization against a contagious childhood disease. One reason ____ children should be immunized is that

The amount of waste caused by full insurance coverage depends on

When state regulators require consumers to purchase and use a safety device,the regulation

When Dale visits the doctor,Dale does not pay for either the visit or any tests the doctor may order.Dale must therefore

The system of government insurance that pays benefits to workers injured on the job is referred to as

The growth of lawsuits seeking compensation from firms when a worker is injured should serve to

The effect of widespread insurance covering routine medical care is to reduce the

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB1 and at the museum is given by MB2.All values are per week. An increase in crime would

A group of physicians that provide healthcare services to members for a fixed annual fee is termed a

The growth of medical insurance in general and first-dollar coverage specifically has reduced the marginal cost of treatment paid by the consumer.Therefore,the current level of medical treatment in the United States is

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB1 and at the museum is given by MB2.All values are per week. The marginal cost of providing security cameras would shift from MC to MC1 if

To achieve the socially optimal workplace injury rate,

One difficulty with the exploitation view of workplace injuries is for it to be successful over time,firms must

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB₁ and at the museum is given by MB₂.All values are per week. An increase in crime would

Suppose that the marginal benefit of having a security camera in the library is given by MB,at the supermarket is given by MB₁ and at the museum is given by MB₂.All values are per week. The marginal cost of providing security cameras would shift from MC to MC₁ if