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| 1.
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Regulatory failure means: |
| | A) | Failure by Government to recognise that a market needs regulation |
| | B) | Failure by private sector firms to cooperate with regulators |
| | C) | Failure by regulators to carry out their functions properly |
| | D) | Failure in public support for regulation |
| | E) | None of the above. |
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| 2.
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For a fixed percent reduction in pollution emissions to be economically efficient, it would have to be the case that: |
| | A) | the marginal cost of pollution control is the same across all firms. |
| | B) | enforcement is vigorous. |
| | C) | the marginal cost of pollution control varies wildly across firms. |
| | D) | large polluters reduce emissions by more than small polluters. |
| | E) | small polluters reduce emissions by more than large polluters. |
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| 3.
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The advantage to selling pollution permits rather than using a fixed percent reduction for all firms is: |
| | A) | government raises additional revenue. |
| | B) | reductions in pollution are accomplished by those firms that can do so at least cost. |
| | C) | enforcement costs are eliminated. |
| | D) | pollution is driven to zero. |
| | E) | an increase in the benefits to pollution reduction. |
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| 4.
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Suppose that all workers value a 1% reduction in the workplace injury rate at €1,000.The cost of a 1% injury rate reduction is €200 per worker. Existing firms currently pay €20,000 per year to workers, without any effort to improve safety. Suppose new firms began to offer workers €19,500 and a 1% reduction in the injury rate. The new firms would find that: |
| | A) | no workers are applying for their jobs. |
| | B) | their costs of wages and injury reduction exceed the costs of the existing firms. |
| | C) | workers would be very willing to take up their offer. |
| | D) | only lower quality workers would apply for their jobs. |
| | E) | only injury prone workers would apply. |
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| 5.
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A non-excludable good is one for which: |
| | A) | the availability of the good does not depend on the number of consumers. |
| | B) | consumers must pay for before they can consume it. |
| | C) | consumers can't remove from their budget. |
| | D) | consumers can consume the good without paying for it. |
| | E) | consumption continues despite serious health risks, e.g., cigarettes. |
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| 6.
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A good or service which is both rival and excludable is a(n) |
| | A) | public good. |
| | B) | commons good. |
| | C) | pure public good. |
| | D) | collective good. |
| | E) | private good |
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| 7.
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When dealing with pure public goods, |
| | A) | the government must always provide them. |
| | B) | private firms will always provide them. |
| | C) | the government frequently provides them although private firms provide some. |
| | D) | the government must legally compel private firms to provide them. |
| | E) | private firms provide nearly all of them and the government provides the few remaining ones. |
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| 8.
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To justify the governmental provision of a public good in terms of economic efficiency, it must be the case that the __________ and that __________ |
| | A) | good is indeed a public good; is the only necessary requirement |
| | B) | benefits exceed the costs; no lower cost provider exists |
| | C) | voters desire the good; no new taxes will be needed |
| | D) | benefits exceed the costs; is the only necessary requirement |
| | E) | benefits exceed the costs; all voters value the good equally |
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| 9.
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If government needs to raise revenues to pay for a public good, the ideal tax structure would be to tax |
| | A) | all citizens by the same amount. |
| | B) | all citizens in proportion to their willingness to pay for the public good. |
| | C) | all citizens by the same proportion of their income. |
| | D) | only the citizens that use the public good. |
| | E) | only the citizens that are willing to pay for the public good |
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| 10.
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The demand curve for public goods is constructed by |
| | A) | summing each voter's desired quantity of the public good at various reservation prices. |
| | B) | surveying voters on how much of a particular public good at various reservation prices. |
| | C) | summing each voter's reservation price for a given level of public good. |
| | D) | a demand curve cannot be constructed for public goods because of their non-rival and non-excludable nature. |
| | E) | withdrawing the public good and measuring the public outcry. |
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