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1 | |
Toll roads are collective goods rather than public goods because: |
| | A) | they are subsidized by general tax revenue. |
| | B) | they are limited access, excluding those who won''t pay. |
| | C) | many people can use the same road repeatedly. |
| | D) | not everyone in the population drives. |
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2 | |
The demand curve for a public good |
| | A) | is the horizontal summation of the demand curves of all citizens. |
| | B) | shows how much people desire a public good, whether or not they are willing to pay for it. |
| | C) | is the vertical summation of each citizen''s marginal willingness to pay for the good or service. |
| | D) | can be empirically determined by observing voting patterns. |
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3 | |
Two citizens, the only citizens in the community, have identical marginal willingness-to-pay curves for a public good, given (for each) by the formula MWP = 20 - 2Q. If the marginal cost of providing the public good is $20/unit, how many units of the public good should be provided? |
| | A) | 0 |
| | B) | 5 |
| | C) | 10 |
| | D) | 20 |
| | E) | Not enough information has been provided. |
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4 | |
In a suburban town, the town council contracted with the local paper to have the police deliver the morning papers while they do their routine patrol. The police officers are paid an additional amount, but the town treasury keeps the balance of the paper delivery revenues, thus reducing the cost of providing the police protection. This case is an example of |
| | A) | using club theory to provide the public good of police protection. |
| | B) | relying on charity to provide a public good. |
| | C) | taxing the paper readers. |
| | D) | selling a by-product of a public good. |
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5 | |
Your student government has decided to fund one of three possible projects. One third of the students want 1) more movies 2) longer library hours and 3) more parking, in that order. Another third of the student body want 1) more parking 2) more movies and 3) longer library hours, in that order. The last third of the student body want 1) longer library hours 2) more parking and 3) more movies, in that order. You want longer library hours, and you are in charge of setting up the vote. First, two projects will be voted on, and then the winner will be pitted against the third project. How will you structure the vote? |
| | A) | First, movies and parking will be voted on, and then the winner of that contest will face the library project. |
| | B) | First, movies and library will be voted on, and then the winner of that contest will face the parking project. |
| | C) | First, library and parking will be voted on, and then the winner of that contest will face the movie project. |
| | D) | It doesn''t matter, because library hours will lose no matter what, since 2/3 of the students rank it behind movies. |
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6 | |
Majority voting would be more efficient if: |
| | A) | voters could buy and sell their votes on an open market. |
| | B) | voters would honestly vote on an intensity scale of -5 to +5. |
| | C) | both a and b were possible. |
| | D) | neither a or b were possible, because majority voting is already efficient. |
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7 | |
There are N citizens (none of whom is a free rider) in Melonville, each with a MWP curve for a public park given by the formula MWP = 10 - 0.5Q, where Q is in hectares. The Marginal Cost of adding an additional hectare to the size of the park is $120 per hectare. The park is approved at a size of 12 hectares. What is the number of citizens N in Melonville? |
| | A) | 8 |
| | B) | 12 |
| | C) | 20 |
| | D) | 24 |
| | E) | 30 |
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8 | |
Two firms are seeking a special exporting licence that will give one of them a $1 million economic profit. Only one will get the licence. It is likely that |
| | A) | they will dissipate much or all of the expected profit by competing with each other in a lobbying frenzy for the licence. |
| | B) | they will collude to share the profits of these favours over time. |
| | C) | the government will redo the licence agreement if they suspect that economic profits are being made. |
| | D) | the firms will recognize the futility of rent-seeking and simply hope that they will be awarded the licence on the merits of their operation. |
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9 | |
Students are told to pick their grade out of a hat that has a grade distribution of 5 A, 10 B, 15 C, 10 D, and 5 F. They can change the distribution if they like, but they can not change the overall class grade point average. If they follow John Rawls'' "veil of ignorance" predictions, they will invariably |
| | A) | choose to leave the distribution as it is. |
| | B) | choose to eliminate the F and A grades (and sometimes even the B and D grades, so everyone gets a C). |
| | C) | choose to increase the A grades and the F grades, hoping to increase their chances of an A. |
| | D) | toss a coin to decide what to do, because they are indifferent between any of the above listed options. |
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10 | |
The "veil of ignorance" referred to in question 18-8 leads to qualifications of marginal productivity theory. The main policy conclusion of this Rawlsian thinking is that |
| | A) | society should socialize its citizens in ways that will teach them to work for non-material rewards. |
| | B) | public goods should be provided in greater quantity to all citizens. |
| | C) | additional inequality will only be justified if it has the effect of raising everyone''s income. |
| | D) | there should be an upper limit on income beyond which a 100% tax rate would apply. |
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2002 McGraw-Hill Higher Education