Ch.30 Quiz

Instructions
Please read the questions carefully.

This assessment is worth 100 points.

  1. Answer the next question(s) on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society.



    Refer to the above data. If the marginal cost of this good at the optimal quantity is $4, the optimal quantity must be:   (4 points)

    a.  
    b.  
    c.  
    d.  
    e.  

  2. Cost-beneifit analysis is attempts to:   (4 points)

    a.  
    b.  
    c.  
    d.  



  3. Refer to the above diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) and from S to S2 in diagram (b). The shift of the supply curve from S to S1 in diagram (a) might be caused by a per unit:   (4 points)

    a.  
    b.  
    c.  
    d.  




  4. Refer to the above competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D2 and S2. If there are substantial spillover costs associated with the production of Z, then:   (4 points)

    a.  
    b.  
    c.  
    d.  

  5. Clearly defined property rights and liability rules reduce negative spillovers by:   (4 points)

    a.  
    b.  
    c.  
    d.  

  6. Depletion of fish stocks through overfishing is a good example of the:   (4 points)

    a.  
    b.  
    c.  
    d.  

  7. In a market for pollution rights an increase in demand would:   (4 points)

    a.  
    b.  
    c.  
    d.  

  8. The creation of markets for pollution rights would provide:   (4 points)

    a.  
    b.  
    c.  
    d.  



  9. Refer to the above diagram of a market for pollution rights. Without this market for pollution rights, the quantity (tons) of pollution would be:   (4 points)

    a.  
    b.  
    c.  
    d.  

  10. The right to buy and sell emission rights for sulfur-dioxide pollution was granted in the:   (4 points)

    a.  
    b.  
    c.  
    d.  

  11.       

    Refer to the above diagram. Which one of the following might shift the marginal cost curve from MC1 to MC2?   (4 points)

    a.  
    b.  
    c.  
    d.  

  12.       

    Refer to the above diagram. Which one of the following might shift the marginal benefit curve from MB1 to MB2?   (4 points)

    a.  
    b.  
    c.  
    d.  

  13. Additional recycling will reduce economic efficiency if:   (4 points)

    a.  
    b.  
    c.  
    d.  

  14. As it applies to insurance, the adverse selection problem is the tendency for:   (4 points)

    a.  
    b.  
    c.  
    d.  

  15. Because the Federal government typically provides disaster relief to farmers, many farmers do not buy crop insurance even through it is Federally subsidized. This illustrates:   (4 points)

    a.  
    b.  
    c.  
    d.  

  16. (Last Word) According to economists Ayres and Levitt, Lojack and other car retrieval systems that rely on hidden radio transmitters create a significant:   (4 points)

    a.  
    b.  
    c.  
    d.  

  17. That government that has the smallest budget is the most efficient in the economic sense.   (4 points)

    a.  
    b.  

  18. A demand curve for a public good is determined by summing horizontally the individual demand curves for the public good.   (4 points)

    a.  
    b.  

  19. Cost-benefit analysis is frequently difficult to apply because it is difficult to quantify the full benefits of a public good or service.   (4 points)

    a.  
    b.  

  20. Present law forbids all trades or sales of pollution rights.   (4 points)

    a.  
    b.  

  21. Pollution has its roots in the law of conservation of matter and energy.   (4 points)

    a.  
    b.  

  22. Society's optimal amount of pollution abatement is where society's marginal benefit of abatement is zero.   (4 points)

    a.  
    b.  

  23. Society's marginal cost of pollution abatement curve slopes upward because of the law of diminishing marginal utility.   (4 points)

    a.  
    b.  

  24. Other things equal, an increase in the demand for recycled inputs will reduce the amount of recycling which takes place.   (4 points)

    a.  
    b.  

  25. The moral hazard problem is the tendency of some parties to a contract to alter their behavior as a result of the contract in ways which are costly to the other party.   (4 points)

    a.  
    b.  



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