Econ 88265 Sales Tax Rate Exam

14Student:1.Ifagoodcanbeconsumedbyonepersonwithoutreducingtheavailabilityofthegoodtoothers,thisgoodisa(n)A.nonexcludableB.purepublicC.commonD.nonrivalgood.2.TosaythataparticulargoodisnonrivalmeansthatA.ithasnosubstitutes.B.consumerscanenjoyitwithoutpayingforit.C.consumptionofthegoodbyonepersondoesnotdiminishtheavailabilityofthegoodtoothers.D.consumptionofthegoodbyonepersonreducestheavailabilityofthegoodtoothers.3.Ifitisimpossibleorhighlycostlytopreventconsumersfromconsumingagoodwhentheyhavenotpaidforit,thegoodisa(n)A.nonexcludableB.purepublicC.privateD.nonrivalgood.4.CleanairisanexampleofagoodthatisA.neithernonrivalnornonexcludable.B.largelynonrivalandnonexcludable.C.onlynonexcludable.D.onlynonrival.5.Whichofthefollowingitemsisanexampleofanonrivalbutexcludablegood?A.Pay-per-viewmovies.B.Corn.C.Nationaldefense.D.BroadcastTV.6.Aaron'sneighborCliffkeepshisfrontyardwell-manicuredandplantsbeautifulflowerswhichAaronenjoys.IflocallawpreventsClifffromfencinghisyard,thebeautyofCliff'sfrontyardisA.nonrival.B.aprivategood.C.nonexcludable.D.bothnonrivalandnonexcludable.7.TheswingsetatapopularandunfencedpublicparkisA.nonrival.B.nonexcludable.C.acollectivegood.D.apurepublicgood.8.Yourstatedepartmentoftransportationisconsideringinstallingtollboothsandgatesononeofthefreewaysthatrunsthroughanunpopulatedpartofthestate.Ifthisisadopted,agoodthatiscurrentlya(n)A.publicgoodwillbecomeaprivategood.B.nonrivalgoodwillbecomearivalgood.C.nonexcludablegoodwillbecomeanexcludablegood.D.rivalgoodwillbecomeanexcludablegood.9.Agoodorservicethatisbothhighlynonrivalandhighlynonexcludableisa(n)andagoodorservicethatpossessessomedegree(butnotahighdegree)ofbeingbothnonrivalandnonexcludableisaA.publicgood;purepublicgood.B.purepublicgood;publicgood.C.purepublicgood;privategood.D.publicgood;privategood.10.AgoodorservicethatisrivalbutistosomeextentnonexcludableiscalledaservicethatisnonrivalbutisexcludableisreferredtoasaA.publicgood;privategood.B.commonsgood;publicgood.C.commonsgood;collectivegood.D.publicgood;collectivegood.11.AgoodorservicewhichisbothrivalandexcludableisaA.publicgood.B.privategood.C.collectivegood.D.commonsgood.12.ApurepublicgoodisonethatisA.highlynonrivalandnonexcludable.B.slightlynonrivalandnonexcludable.C.nonexcludable.D.highlynonrivalbutonlyslightlynonexcludable.13.AcollectivegoodisonethatisA.toadegreenonrivalbutisexcludable.B.rivalbuttoadegreenonexcludable.C.consumedbymorethanoneperson.D.toadegreebothnonrivalandnonexcludable.14.Ofthefollowing,thebestexampleofapurepublicgoodisA.cableTV.B.anationalpark.C.nationaldefense.D.education.,andagoodor15.SupposethatthelatestIndianaJonesmovieplayedintheatersfirst,whereitwassoldoutduringitsopeningweek.Severalmonthslateritwasavailableonpay-per-viewTV.TwoyearslateritwasshownonCBS,abroadcasttelevisionnetwork.Whenthemoviewasplayingatthetheateritwasagood,whenitwasavailableonpay-per-viewTVitwasagoodandwhenitwasshownonCBSitwasagood.A.private;public;publicB.private;collective;publicC.collective;private;commonsD.collective;commons;public16.SupposethatthelatestIndianaJonesmovieplayedintheatersfirst,whereitwassoldoutduringitsopeningweek.Severalmonthslateritwasavailableonpay-per-viewTV.TwoyearslateritwasshownonCBS,abroadcasttelevisionnetwork.WhenafamilyrentsanIndianaJonesmovieonDVDtowatchtogether,theDVDisaA.publicB.jointlyconsumedprivateC.jointlyconsumedpublicD.privategood.17.AfewyearsagoStanandhiskidsweretheonlypeoplewhofishedinStan'spersonalpond.ThenStanstartedtosellticketstothepublic.Stanleftthepondandthelanditwasontothestateinhiswill,stipulatingthatthelandbeusedasapublicfishingarea.AfterStandiesthepondwillbecomeaA.privateB.commonsC.collectiveD.publicgood.18.AfewyearsagoStanandhiskidsweretheonlypeoplewhofishedinStan'spersonalpond.ThenStanstartedtosellticketstothepublic.Stanleftthepondandthelanditwasontothestateinhiswill,stipulatingthatthelandbeusedasapublicfishingarea.WhenStanstartedtosellticketstothepublictofishinhisponditbecameaA.privateB.commonsC.collectiveD.publicgood.19.AfewyearsagoStanandhiskidsweretheonlypeoplewhofishedinStan'spersonalpond.ThenStanstartedtosellticketstothepublic.Stanleftthepondandthelanditwasontothestateinhiswill,stipulatingthatthelandbeusedasapublicfishingarea.WhenStanandhiskidsweretheonlypeoplefishingintheponditwasaA.privateB.publicC.collectiveD.commons20.Afreewaywithoutanytollsbetween12amand5amisanexampleofaA.collectiveB.publicC.privateD.commonsgood.good.21.WaterflowinginariverisaA.public;commonsB.public;privateC.public;collectiveD.collective;privategood,butasingleservingbottleofwaterisagood.22.AcrowdedbeachwithoutanyentrancefeeisaA.publicB.privateC.purepublicD.commonsgood.23.ApatchofediblemushroomsgrowingwildinanationalforestisaA.publicB.privateC.purepublicD.commons24.Whendealingwithpurepublicgoods,A.thegovernmentmustalwaysprovidethem.B.privatefirmswillalwaysprovidethem.good.C.thegovernmentfrequentlyprovidesthemalthoughprivatefirmsprovidesome.D.privatefirmsprovidenearlyallofthemandthegovernmentprovidesthefewremainingones.25.RadioandbroadcasttelevisionareexamplesofA.collectivegoods.B.privategoods.C.purepublicgoodsprovidedbythegovernment.D.purepublicgoodsprovidedbyprivatefirms.26.Toproperlyjustifythegovernmentalprovisionofapublicgood,itmustbethecasethattheandthat.A.goodisindeedapublicgood;themajorityofvoterswantittobeprovidedB.benefitsexceedthecosts;nolowercostproviderexistsC.votersdesirethegood;nonewtaxeswillbeneededD.benefitsexceedthecosts;amajorityofvotersvaluethegoodequally27.LaneandRileyaretheonlytworesidentsinaneighborhood,andtheysharethesamedriveway.Theywouldliketohavethedrivewaypaved.Thevalueofthepaveddrivewayis$1500toLaneand$1000toRiley.Irrespectiveofwhopaysforthepavingbothpeoplewillbenefitfromit.Whatisthemostacontractorcanchargeforpavingthedrivewayandstillbehiredbyatleastoneofthem?A.$1000B.$1500C.$2000D.$250028.LaneandRileyaretheonlytworesidentsinaneighborhood,andtheysharethesamedriveway.Theywouldliketohavethedrivewaypaved.Thevalueofthepaveddrivewayis$1500toLaneand$1000toRiley.Irrespectiveofwhopaysforthepavingbothpeoplewillbenefitfromit.Supposethecostofpavingthedrivewayis$2000,itisforthemtoshareitscost,becausethentheywillhaveatotaleconomic.A.inefficient;shortageof$500B.efficient;surplusof$500C.efficient;shortageof$500D.efficient;surplusof$100029.LaneandRileyaretheonlytworesidentsinaneighborhood,andtheysharethesamedriveway.Theywouldliketohavethedrivewaypaved.Thevalueofthepaveddrivewayis$1500toLaneand$1000toRiley.Irrespectiveofwhopaysforthepavingbothpeoplewillbenefitfromit.Relativetothetwo-personscenariodescribed,ifalargenumberofpeoplesharethedriveway,thejointpurchaseofpavingisandtheemerges.A.impossible;tragedyofthecommonsB.lesscostly;maximumeconomicefficiencyC.morelikelytobeaccomplished;free-riderproblemD.moredifficult;free-riderproblem30.AssumethateachdaytenthousandchildrenwatchSesameStreetonpublictelevisionandthattheeducationalbenefitsofwatchingSesameStreetgenerateprivatebenefitsof$100perchildperyearandapositiveexternalityof$50perchildperyear.NoproductsareadvertisedonSesameStreetbutonceayearthestationsholdapledgedrive.Duringpledgedrivesviewersareaskedtomakevoluntarycontributionstothepublicstationinordertokeeptheprogrammingviable.ThebroadcastofSesameStreetyieldstotalprivatebenefitsof.A.$10,000;$15,000B.$1,000,000;$1,500,000C.$100,000;$150,000D.$1,000,000;$500,000andtotalsocialbenefitsof31.AssumethateachdaytenthousandchildrenwatchSesameStreetonpublictelevisionandthattheeducationalbenefitsofwatchingSesameStreetgenerateprivatebenefitsof$100perchildperyearandapositiveexternalityof$50perchildperyear.NoproductsareadvertisedonSesameStreetbutonceayearthestationsholdapledgedrive.Duringpledgedrivesviewersareaskedtomakevoluntarycontributionstothepublicstationinordertokeeptheprogrammingviable.SupposethateachparenthasjustonechildwhowatchesSesameStreet.ThatparenthasaprivateincentivetocontributeA.$0B.$50C.$100D.$150duringthepledgedrive.32.AssumethateachdaytenthousandchildrenwatchSesameStreetonpublictelevisionandthattheeducationalbenefitsofwatchingSesameStreetgenerateprivatebenefitsof$100perchildperyearandapositiveexternalityof$50perchildperyear.NoproductsareadvertisedonSesameStreetbutonceayearthestationsholdapledgedrive.Duringpledgedrivesviewersareaskedtomakevoluntarycontributionstothepublicstationinordertokeeptheprogrammingviable.Ifthepublictelevisionstationscollectlessthan$100perchildduringthepledgedrivesitisevidencethatA.thegovernmentsubsidyistoohigh.B.viewersdonottakeexternalitiesintoaccountwhenmakingadonation.C.someviewersarefreeriders.D.viewersdonotvalueSesameStreetasmuchasoriginallyestimated.33.OnesourceoffrictioninthegovernmentalprovisionofapurepublicgoodisthatvotersreceiveofthepublicgoodandhaveA.differentamounts;differentreservationpricesB.differentamounts;thesamereservationpriceC.thesameamount;differentreservationpricesD.thesameamount;thesamereservationpriceforthepublicgood.34.CitizensofTinytownareconsideringbuildinganewcitypark.IfeachvoterinTinytownhasareservationpricethatislessthanthetotalcostofthepark,thenA.bydefinition,thebenefitsoftheparkarelessthanthecostsandthustheparkshouldnotbebuilt.B.somesortofcollectiveactionbyvoterswillbenecessarytofundthepark.C.aprivatefirmwillhaveanincentivetobuildthepark.D.theparkwillneverbebuilt.35.Ifalltaxpayerspaythesameamountoftax,thetaxistermeda(n)A.proportionaltax.B.progressivetax.C.headtax.D.perunittax.36.Ifalltaxpayerspaythesamepercentageoftheirincomeintaxes,thetaxistermeda(n)A.proportionaltax.B.progressivetax.C.headtax.D.excisetax.37.Iftaxpayerspayasmallerfractionoftheirincomeintaxesastheirincomesrise,thetaxistaxpayerspayalargerfractionoftheirincomeintaxesastheirincomerise,thetaxisA.regressive;progressiveB.progressive;regressiveC.proportional;progressiveD.regressive;proportionalandif38.Curlypays$12,000intaxesandearns$150,000.Moepays$7,000intaxes.Ifthetaxsystemisproportional,thenMoe'sincomeisA.$56,000.B.$125,000.C.$87,500.D.$98,000.39.Spikepays$14,000intaxeswhileearning$100,000.Aceearns$120,000.Ifthetaxsystemisprogressive,AcewillpaytaxesofA.$15,500.B.morethan$16,800.C.morethan$15,500butlessthan$16,800.D.$16,800.40.Ifgovernmentneedstoraiserevenuestopayforapublicgood,theidealtaxstructurewouldbetotaxA.allcitizensbythesameamount.B.allcitizensinproportiontotheirwillingnesstopayforthepublicgood.C.allcitizensbythesameproportionoftheirincome.D.onlythecitizensthatstatethattheywillusethepublicgood.41.AheadtaxmeanstheamountoftaxpaidisA.thesameforalltaxpayers.B.thesameforallfamilies.C.alinearlyincreasingfunctionofthetaxpayer'sincome.D.thesameforalltaxpayerswhousethepublicgood.42.Ifgovernmentchoosestouseaheadtaxtofinanceaparticularpublicgood,thentheA.percentofincomepaidintaxesisconstant.B.amountoftaxpaidbyeachtaxpayerdeclinesasincomerises.C.percentofincomepaidintaxesdeclinesasincomerises.D.percentofincomepaidintaxesincreasesasincomerises.43.AproportionaltaxresultsinA.alargerpercentageofincomegoingtotaxesasincomerises.B.asmallerpercentageofincomegoingtotaxesasincomerises.C.thesameamountofincomegoingtotaxesasincomerises.D.thesamepercentageofincomegoingtotaxesasincomerises.44.Joeearns$10,000inincomeandpays$1,000intaxeswhileJackearns$30,000andpays$4,000intaxes.ThestructureofthistaxisA.progressive.B.proportional.C.regressive.D.aheadtax.45.SupposethatJoshpays$6,000inincometaxesandMaggiepays$4,000.Iftheyaresubjecttoaprogressivetaxstructure,wecansaythatA.Joshpaysasmallerpercentageofhisincomeintaxes.B.JoshhasahigherincomethanMaggie.C.MaggiehasahigherincomethanJosh.D.JoshandMaggiepaythesamepercentageoftheirincomeintaxes.46.ThecurrentU.S.incometaxsystemrequirestaxpayerstopayahighermarginaltaxrateonhigherlevelsoftaxableincome.Supposethatthetaxrateis10%onthefirst$15,000oftaxableincome,15%onthenext$45,000oftaxableincome,30%onthenext$60,000oftaxableincome,and35%ontaxableincomeabove$120,000.AnincometaxsystemliketheonedescribedisA.progressive.B.regressive.C.proportional.D.progressivewhenincomeislow,thenregressive.47.ThecurrentU.S.incometaxsystemrequirestaxpayerstopayahighermarginaltaxrateonhigherlevelsoftaxableincome.Supposethatthetaxrateis10%onthefirst$15,000oftaxableincome,15%onthenext$45,000oftaxableincome,30%onthenext$60,000oftaxableincome,and35%ontaxableincomeabove$120,000.Supposethatthetaxcodealsoincludesprovisionsthatallowtaxpayerstoreducetheincomeonwhichtheyaretaxed,andthatthoseprovisionsmostoftenapplyonlytothewealthiesttaxpayers.TheseprovisionstendtomakethetaxcodeA.moreregressive.B.moreefficient.C.lessprogressive.D.lessregressive.48.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.ThetotalsocialbenefittoaswimmingpoolinPleasantvilleisA.$1,490.B.$1,000.C.$1,590.D.$1,120.49.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.BuildingtheswimmingpoolwouldA.reduce;thecostsexceedthebenefitstotaleconomicsurplusbecause.B.reduce;taxeswouldhavetobecollectedtobuilditC.increase;thebenefitsexceedthecostsD.increase;thecostscanbepassedtousersfromothertowns50.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.Franproposesthatthecitybuildthepoolandfinanceitwitha$200taxfromeachvoter.Theoutcomeofthisproposalwillbe.A.5;0;passB.4;1;passC.2;3;failD.3;2;failvotesinfavorandvotesopposedandthemeasurewill51.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.Kyleproposesthatallvoterspay68%oftheirmarginalbenefitintaxestopayforthepool.Theoutcomeofthisproposalis.A.4;1;passB.5;0;passC.0;5;failD.3;2;passvotesinfavor,votesopposedandthemeasurewill52.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.SupposethatSamproposesallowingaprivatefirmtobuildthepoolthatwouldchargethesameonetimefeetoeveryoneforunlimitedaccesstothepool.TheoutcomewouldbethatthepoolwouldA.bebuiltandthefeewouldbe$200.B.notbebuilt.C.bebuiltandthefeewouldbe$250.D.bebuiltandthefeewouldbe$334.53.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.Ataxequalto68%ofeachtaxpayer'smarginalbenefitswouldprovideapoolandcitizenswoulduseit,whileaprivatefirmwouldprovideapoolandA.allofthe;alloftheB.four;threeC.allofthe;threeD.four;twocitizenswoulduseit.54.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.ThenetsocialbenefitofprovidingthepublicgoodisA.$100.B.$700.C.$900.D.$1,000.55.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.Supposethatthegovernmentaccuratelyknewthethreereservationpricesandthecostofthepublicgood.Toachievetheidealtaxstructureandcollectnomoreintaxrevenuethan$900,eachvotershouldbechargedpercentoftheir.A.100;reservationpriceB.70;reservationpriceC.20;incomeD.90;reservationprice56.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.Sincethegovernmentdoesnotknowandcannotdiscoverthevoters'truereservationprices,itproposesaheadtaxof$300pervoter.TheresultofthereferendumisA.thetaxpassesandthepublicgoodisprovided.B.MaxvotesforthetaxbutKrisandTaylorvoteagainstitanditfails.C.Maxvotesforthetax,KrisvotesagainstitbutTaylor'svoteisuncertain.D.allthreevotersvoteagainstthetax.57.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.Supposethegovernmentproposesaproportionalincometaxof8%.TheresultofthereferendumwillbethatA.allthreevoterswillvoteforthetax.B.MaxandTaylorwillvoteagainstthetaxbutKriswillvoteforit.C.KrisandMaxwillvoteforthetax,Taylorwillvoteagainstit.D.allthreevoterswillvoteagainstthetax.58.Thetextbookstatesthatempiricalstudieshavefoundthatthedemandforpublicgoodslikepublicparks,environmentalprotectionandpublicsafetyA.isquitepriceinelastic.B.hasasmall,positiveincomeelasticity.C.ispriceelastic.D.hasanincomeelasticityinexcessof1.59.ThedemandcurveforpublicgoodsisconstructedbyA.summingeachvoter'sdesiredquantityofthepublicgoodatvariousreservationprices.B.surveyingvotersonhowmuchofaparticularpublicgoodtheywoulduseatvariousreservationprices.C.summingeachvoter'sreservationpriceforagivenlevelofpublicgood.D.dividingthetotalcostofprovidingthepublicgoodbythenumberofpotentialusers.60.SupposeScott'sdemandforapublicgoodisP=7-.3QandMike'sdemandisP=10-1.5Q.TheequationforsocialdemandforthepublicgoodisA.P=20-3.0Q.B.P=17-1.8Q.C.P=3-1.2Q.D.P=14-.6Q.61.Toderivethemarketdemandcurveforaprivategoodonesumsthe.Forapublicgood,onesumsthe.A.individualquantitiesatvariousprices;individualquantitiesatvariouspricesB.individualpricesatvariousquantities;individualquantitiesatvariouspricesC.individualquantitiesatvariousprices;individualpricesatvariousquantitiesD.individualpricesatvariousquantities;individualpricesatvariousquantities62.IfvotersA,B,andChavethefollowingdemandcurvesforapubliclibraryPa=5-2Q,Pb=7-.5Q,andPc=2-4Q,thensocialdemandforapubliclibraryisA.P=6-12Q.B.P=15-6Q.C.P=21-1.5Q.D.P=14-6.5Q.63.Whichofthefollowingstatementsabouttheprovisionofpublicgoodsistrue?A.Governmentmustalwaysprovidepublicgoods.B.Theoptimalamountofpublicgoodprovisionisthatlevelatwhichalltaxpayersreceivesomeofthegood.C.Ifthemarginalbenefitofthepublicgoodexceedsthemarginalcosts,moreshouldbeprovided.D.Theoptimalamountofpublicgoodprovisioniswhentotalbenefitsequaltotalcosts.64.Refertothefigureabove.Ifthegoodshownonthegraphsisaprivategoodatapriceof$4marketdemandisA.100B.90C.70D.50units.65.Refertothefigureabove.Assumethatthegoodshownonthegraphsisapublicgood.If40unitsareprovided,totalbenefitequals.A.$7B.$10C.$20D.$3066.Refertothefigureabove.Ifthegoodshownonthegraphsisapublicgood,demandedwhenpriceis$21andifthegoodinthetableisaprivategood,demandedwhenpriceis$21.A.0;0B.20;0C.20;20D.10;20unitsareunitsare67Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Fora2-acrepublicpark,themarketreservationpriceisA.$6.B.$8.C.$14.D.$26.peracre.68Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Themarketreservationpriceis$14peracrefora(n)A.2-acreB.4-acreC.6-acreD.8-acrepublicpark69Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Fora4-acrepublicparkthemarketreservationpriceisA.$6.B.$8.C.$14.D.$20.70Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposethecitycanpurchaselandfortheparkatacostof$20peracre.Theoptimalparksizewouldbeacres.A.2B.4C.6D.871Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposethecitycanpurchaselandfortheparkatacostof$8peracre.Theoptimalparksizewouldbeacres.A.2B.4C.6D.872Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposeawealthycitizendonates2acresoflandtothecityandlandcosts$20peracre.TheoptimalparksizeisA.2acres.B.4acres.C.6acres.D.8acres.73Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposethatthecityreceivesagrantthatpaysonehalfofthecostofeachacrethecitybuys.Ifthecostoflandis$28peracre,theoptimalparksizeisA.8.B.2.C.4.D.6.74.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Whatisthey-axisinterceptofthevillage'scollectivedemandforfireworks?A.25B.50C.10D.100075.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Whatisthex-axisinterceptofthevillage'scollectivedemandforfireworks?A.25B.50C.100D.50076.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Suppose10fireworksunitshavebeensetoff.Whatisthemarginalcostofprovidingonemoreunitatthefireworksshow?A.0B.10C.25D.10077.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Thesignificanceofthepriceof10isthatitA.assistsinreadingthegraphbyindicatingtheunits.B.isthemarginalcostofprovidingonemoreunitoffireworks.C.istheaveragecostofproviding25unitsoffireworks.D.istheminimumper-residentcontributionnecessarytohostafireworksdisplay.78.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:TheresidentsofTowneburgwouldbewillingtopayatotalofforthefirstunitoffireworksandthetotalcostofprovidingthatfirstunitis.A.$1000;$1,010B.$1,010;$1,100C.$960;$100D.$960;$1,01079.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:TheresidentsofTowneburgwouldbewillingtopayatotaloffireworksandthemarginalcostofprovidingthetwenty-fourthunitisA.$20;$200B.$20;$10C.$40;$200D.$40;$10forthetwenty-fourthunitof.80.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:TheresidentsofTowneburgwouldbewillingtopayatotaloffireworksandthemarginalcostofprovidingthetwenty-fifthunitisA.$10;$100B.$0;$10C.$20;$10D.$0;$20forthetwenty-fifthunitof.81.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:SupposethatTowneburgcanonlyblastoffwholenumbersoffireworksunits.TheoptimalnumberofunitsatTowneburg'sfireworksdisplayisA.10B.20C.24D.4882.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:CheapCharlieisoneofTowneburg's20residents.WhileCharlieenjoysfireworksasmuchasthenextTowneburger,whenthefireworksfund-raisingcampaignkicksoff,heclaimstohatethem.CheapCharlieistryingtoA.freeride.B.rentseek.C.forcethevillagetobemoreefficient.D.log-roll.83.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:CheapCharlieisoneofTowneburg's20residents.WhileCharlieenjoysfireworksasmuchasthenextTowneburger,whenthefireworksfund-raisingcampaignkicksoff,heclaimstohatethem.Asaresult,relativetoasituationinwhichCharlieistruthful,theefficientleveloffireworksprovisionisA.less.B.greater.C.less,butthesameamountwillbeprovided.D.thesame,butlesswillbeprovided.84.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Supposethattheunitsofthefireworksdisplayaremeasurednotbythenumberofunitsoffireworksbutbythenumberofpeoplewhowatchthem.AssumethatTowneburgroadsarenevercongestedandthatthedisplaywillbeshownoveralargebodyofwater.IfthatisthecaseA.marginalcostisstill10buttherewillbemorefreeriders.B.marginalcostiszero.C.nothingisdifferentintheeconomicanalysis.D.marginalcostswillincreasewiththenumberofviewers.85.Formanypurepublicgoodslikefireworksdisplays,weatherforecasts,andtelevisionbroadcaststhemarginalcostofservingonemoreconsumeris.A.zero;provisionisinfinite.,andthereforetheoptimalquantityoccurswhenB.determinedbyaveragecostratherthanmarginalcost;priceequalsaveragecost.C.greaterthanaveragecost;governmentprovidesthegood.D.zero;marginalbenefitequalszero.86.Supposethatthemarginalcostofprovidingpublictelevisionservicetoonemorevieweriszero.Ifthisserviceisprovidedtoeachvieweratapriceequaltoitsmarginalcost,A.thetelevisionstationwillhaveanincentivetoprovidetheoptimallevelofprogramming.B.Totalrevenueswillbezero.C.Totalrevenueswillbepositivewhentherearefewviewers,butwilldeclineasmoreviewerstunein.D.Thetelevisionstationwillearnzeroeconomicprofit.87.SupposethataprivatemonopolistissupplyingagoodthatisnonrivalbutexcludabletoamarketwithdemandofP=24-3Q.Ifthemarginalcostofprovidingthisgoodiszerobutthefirmcharges$18,themonopolistwillprovideA.2;8B.6;8C.2;2D.4;2unitsandtheefficientoutputisunits.88.HBOshowsmovieswithoutcommercialinterruptiontopeoplewhopayfortheirservice.ThisisbecauseHBOA.canexcludenonpayingviewers.B.executivesdecidedtodifferentiatethemselvesfromothernetworks.C.showsonlymoviesthatareveryinexpensivetorent.D.issubsidizedbythegovernment.89.Accordingtothetextbook,theprivateprovisionofradioandtelevisionmaynotachieveasociallyefficientoutcomebecauseA.consumersdon'tpayfortheentertainment.B.thegovernmentstrictlyregulatesthemarket.C.increasingly,radioandtelevisionstationsaremonopolies.D.programsarechosenonthebasisofaudiencesizeratherthanthevaluetotheaudience.90.ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Ifviewingtheboxingshowwasfreetoanyconsumerwhotunedin,whatwouldbetheeconomicsurplus?A.$25millionB.$50millionC.$225millionD.$625million91.ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Iftheregulatedpay-per-viewchargeis$5perhousehold,whatwouldbethelosteconomicsurplus?A.$25millionB.$50millionC.$225millionD.$625million92.ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Withafeeof$15perfight,economicsurpluswouldbelost.A.10million;$25millionB.20million;$225millionC.20million;$25millionD.10million;$225millionhouseholdswillwatchand,relativetofreeviewingintotal93.ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Whenthefightisshownaspay-per-viewtelevisionprogrammingsoviewersarechargedafeetowatch,theoutcomeisbecause.A.efficient;priceswillallocatetheprogramtothosewhovalueitmostB.efficient;themarginalcostiszeroC.inefficient;themarginalcostiszeroD.efficient;otherwisefirmswouldhavenoincentivetoprovideagoodthatpeoplevalue94.ThedemandcurvefornewmoviesshownonTVisplottedinthegraphbelow:Ifthenewmovieisshownforfree,whatistheeconomicsurplus?A.$4000millionB.$2000millionC.$1280millionD.$720million95.ThedemandcurvefornewmoviesshownonTVisplottedinthegraphbelow:Iftheregulatedpay-per-viewchargeis$30perhousehold,whatwouldbethelosteconomicsurplus?A.$4000millionB.$2000millionC.$1280millionD.$720million96.ThedemandcurvefornewmoviesshownonTVisplottedinthegraphbelow:Iftheregulatedpay-per-viewchargeisdecreasedfrom$20to$0perhousehold,whatwouldbethegainineconomicsurplus?A.$4000millionB.$320millionC.$1280millionD.$720million97.Showingthemovieaspay-per-viewtelevision,soviewersarechargedafeetowatchprogrammingisbecause.A.efficient;priceswillallocatetheresourcetothosewhovalueitmostB.inefficient;firmswillhaveanincentivetoover-chargeforagoodthatpeoplevalueC.inefficient;pay-per-viewresultsingaininsurplusD.inefficient;pay-per-viewresultsinlossinsurplus98.Thedevelopmentofpay-per-viewtechnologyA.convertedacollectivegoodintoaprivategood.B.allowsconsumerstoseemoviesthatwerepreviouslyunavailableforseveralyears.C.convertedapublicgoodintoacollectivegood.D.hasmadeallconsumersworseoff.99.AnInternetsitethatmaintainsadatabaseofproductreviewsthatanyonecanaccessandthathasadvertisementbannersisA.aprivategood.B.aprivatelyprovidedpublicgoodsellingitsbyproducttoadvertisers.C.agovernmentprovidedpublicgood.D.aprivatelyprovidedpublicgoodinsearchofdonations.100.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisIfGraceseesWillbuildingthefenceshewouldearnahigherpayoffbyA.helpinghim.B.nothelpinghimbecauseshevaluesthefencebylessthandoesWill.C.anuncertainamount.Itdependsonwhetheritisasequentialgameorasimultaneousgame.D.nothelpinghimbecauseshewillgetthevalueofthefencewithoutexpendingtheeffort.101.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisWill'sdominantstrategyinthisgameistoA.buildthefence.B.helpbuildthefenceifheobservesGracestartingtobuilditfirst.C.notbuildthefence.D.alternatebetweenhelpingGraceandnothelpingher.102.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisIntheNashEquilibrium,A.WillwillstarttobuildthefenceandthenGracewillcomeovertohelp.B.Willwillbuildthefencebyhimself.C.Afencewillbebuilt,butitisuncertainwhowillbuildit.D.nofencewillbebuilt.103.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisThisgameisa(n)becauseA.tragedyofthecommons;thebackyardistreatedasacommonareabythepuppies.B.prisoners'dilemma;followingdominantstrategiesleadstoanon-optimalresult.C.exampleoflogrolling;bothneighborsneedtocooperatetoprovidethegood.D.inequitablesituation;GracedoesnotvalueafenceashighlyasdoesWill.104.TheproblemsofexternalitiesandpoorlyformedpropertyrightsareA.minorinmoderneconomies.B.amongseveralrationalesfortheexistenceofgovernment.C.bettersolvedbyprivateratherthangovernmentaction.D.theonlytwolegitimatereasonsforcreatinggovernment.105.Beyondtheprovisionofpublicgoods,governmentexiststoaddressA.nationaldefense.B.theproblemofdecliningmoralvalues.C.limitingpersonalfreedom.D.externalitiesandpropertyrights.106.ThepresenceofanunregulatednegativeexternalitymeansthattheunregulatedmarketequilibriumoutputisA.efficient.B.toosmall.C.toolarge.D.greaterthandemand.107.GovernmentsubsidizeseducationbecauseA.itisapurepublicgood.B.privatefirmswillnotprovideeducation.C.ofcustomandtradition.D.educationisthoughttohavepositiveexternalities.108.Whenanegativeexternalityispresentinamarket,thegovernmentA.mustregulateit.B.shouldregulateitifthepublicsupportsregulation.C.shouldneverregulatedit.D.shouldregulateitifthebenefitsofregulationexceedthecosts.109.ThejudicialsystemisanexampleofgovernmentA.providingapurepublicgood.B.encouragingapositiveexternality.C.definingandenforcingpropertyrights.D.discouraginganegativeexternality.110.ThemostappropriatelevelofgovernmenttoprovidepublicgoodsisA.local.B.state.C.dependentonthespecificpublicgoodinquestion.D.federal.111.OnejustificationforthecreationofafederallevelofgovernmentisA.theabilitytodeficitspend.B.economiesofscaleintheprovisionofmilitarydefense.C.toencouragelocaldiversityinthetypesofpublicgoodsprovided.D.greaterresponsivenesstothewillofthevoters.112.SupposethataNewEnglandstateissufferingfromacidrain,whichistheresultofsulfurdioxideemissionsfromtheindustriesofsouthernstates,A.theindividualstatescaneasilyreachasolutiontotheproblem.B.afederalsolutionisthemostappropriateone.C.statecourtscanprovideadequateremedies.D.itceasestobeanexternality.113.Accordingtothetextbook,asolutiontotheexternalityofgreenhouseemissionswillbedifficulttoachievebecauseA.thescientificevidenceisweak.B.thetechnologytoreduceemissionsisextremelyexpensive.C.aninternationalpoliticalorganizationisnecessarytoenforcethesolution.D.thetechnologytoreduceemissionsisundeveloped.114.PorkbarrelspendingisA.governmentspendingthatinvolvesagriculture.B.legislationthatcostslessthanthetotalbenefitsbutlackspoliticalsupport.C.anothernameforallspendingbythegovernment.D.legislationthatsignificantlybenefitsaparticulargroupofvotersbutcostsmorethanthebenefitstoallvoters.115.LogrollingreferstoA.legislationthataffectsthetimberindustry.B.thepracticewherebylegislatorssupporteachother'sporkbarrelspending.C.thepracticeofintroducingmanysimilarbillshopingthatoneoftheversionswillbecomelaw.D.thepracticeofattachingacontroversialbilltoalargeappropriationsbill.116.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.TaxesinFatlandiaareA.bothaheadtaxandregressive.B.aheadtax.C.proportional.D.regressive.117.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.Themarginalbenefitofaddingathirdarmybaseequalsthelocalmarginalbenefitof$250,000plus,foratotalof.A.$1,000,000;$1,250,000B.-$2,000,000;-$1,750,000C.-$1,000,000;-$750,000D.$7,000,000;$6.750,000118.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.Themarginalbenefitofafourtharmybaseequalsthelocalmarginalbenefitof$250,000plus,foratotalof.A.$1,000,000;$1,250,000B.-$2,000,000;-$1,750,000C.-$1,000,000;-$750,000D.$7,000,000;$6.750,000119.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.SupposethedepartmentofdefenseinFatlandiadecidestoaddtwoadditionalbasesforatotaloffourbases.ThisnumberofbasesisA.exactlyefficient.B.morethanwouldbeefficient.C.fewerthanwouldbeefficient.D.necessarytomaximizetotalbenefits.120.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.SupposethedepartmentofdefenseinFatlandiadecidestoaddtwoadditionalbasesforatotaloffourbasesandNewPorkswickisoneofthestatesthatwillgetabase.Thelocaleconomywillbenefitbyperresident,andeachresident'staxeswillincreaseby.A.$20;$25B.$250;$200C.$25;$20D.$2.50;$2121.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.SupposethedepartmentofdefenseinFatlandiahasproposedaddingtwoadditionalbasesforatotaloffourbases.Basedsolelyonperpersonlocalbenefitsandtaxincreases,residentsofNewPorkswickwillhaveanetgainifA.abaseisaddedinNewPorkswickbutnotintheotherstate.B.newbasesareinstalledinbothstates.C.nonewbasesareadded.D.atotalofthreenewbasesareaddedonlyifoneisinNewPorkswick.122.ThecombinationofporkbarrelspendingandlogrollingleadstoA.inefficientlylargegovernmentspending.B.thelargestnetbenefitforsociety.C.thequickterminationofprojectsthatarewastefulofirrelevant.D.underprovisionofpublicgoods.123.Whentheawardingofaprizeisbasedonasociallyunproductiveactivity,theresultisA.rent-seeking.B.thewinner'scurse.C.logrolling.D.crowdingout.124.Accordingtothetextbook,inrepeatedexperimentswhena$20billisauctionedsuchthatthetwotopbidspaytheauctioneerandthenthetopbidreceivesthe$20bill,theA.topbidis$1;studentsbidinincrementsof$1.B.topbidis$10;thetotalcostisthen$20.becauseC.Sumofthetoptwobidsfrequentlyexceed$50;thebidderwiththesecondplacebidraisesthebidandhopestheotherbidderquits.D.topbidis$20;the$20billisworthexactly$20.125.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.Ifbothfirmsrefrainfromspendinganythingonlobbyingefforts,theexpectedprofitofthecontractisA.$5million.B.$2.5million.C.$2million.D.$1million.126.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.SupposeMegaCablespends$2onlobbyingandAcmespends$1onlobbying.Ifbothfirmsknowwhattheotherisspending,theexpectedprofittoMegaCableis.A.$4,999,998;-$1B.$5million;-$1C.$2.5million;$2.5millionD.0;$5millionandtoAcmeitis127.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.SupposeMegaCablespends$2,000,002onlobbyingwhileAcmespends$2,000,001.Ifbothfirmsknowwhattheotherisspending,theexpectedprofittoMegaCableis.A.$5million;0B.$2,999,998;-$2,000,001C.$2.5million;$2.5millionD.$499,998;-$2,000,001andtoAcmeitis128.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.Ifbothfirmsspend$2.5milliononlobbying,theexpectedprofitofthecontractisA.$5million.B.0.C.$2.5million.D.-$2.5million.129.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.ThereasonbothfirmswillcontinuetoescalatespendingonlobbyingeffortsisbecauseA.thosemakingthedecisiondemand"gifts".B.theCEO'softhetwofirmsarerivals.C.spending$1morethanyouropponentmeanswinningthecontract.D.thefirmscanpassthecostsalongtoconsumers.130.PatandChrisarevyingforJordan'sheart,andbothvaluewinningJordan'saffectionat$500.Jordanwillchoosebetweenthembasedsolelyonwhichonespendsthemostmoneyongifts,movies,dinnerandotherenticements.PatandChrisarefullyawareofeachotherandofeachother'sspending.Spendingmustbeinincrementsof$1ormore.Beforethecompetitionbegins,Patdecidestospendupto$250onJordan.IfChrisknowsthatthisisPat'splan,ChrisshouldA.matchPat's$250.B.committospendingamaximumof$251.C.anticipatethatPatwillnotstickwiththeoriginalplantospend$250.D.enterintoaninformalagreementwithPatbywhichbothagreetospendonly$100.131.PatandChrisarevyingforJordan'sheart,andbothvaluewinningJordan'saffectionat$500.Jordanwillchoosebetweenthembasedsolelyonwhichonespendsthemostmoneyongifts,movies,dinnerandotherenticements.PatandChrisarefullyawareofeachotherandofeachother'sspending.Spendingmustbeinincrementsof$1ormore.Patthinksthatthereisa50%chancethatChriswillcontinuetospendmoreonJordanregardlessofthecurrentlevelofspending.SupposethatPathasnowspent$250onJordanandChrishasspent$251.IfPatweretoincreasespendingto$252themarginalcostofthatexpenditurewouldbewhiletheexpectedmarginalbenefitis.A.$252;$250B.$2;$250C.$250;$250D.$250;$500132.PatandChrisarevyingforJordan'sheart,andbothvaluewinningJordan'saffectionat$500.Jordanwillchoosebetweenthembasedsolelyonwhichonespendsthemostmoneyongifts,movies,dinnerandotherenticements.PatandChrisarefullyawareofeachotherandofeachother'sspending.Spendingmustbeinincrementsof$1ormore.Aftereachhasspent$100,PatsaystoChris,"Let'sbereasonable.IwillpromisetoonlyspendjustalittlemoreonJordanifyoupromisetodothesame."Pat'sstatementA.iscrediblebecauseitiscostlytofake.B.isnotcrediblebecausekeepingthepromisewillnotbeinPat'sbestinterest.C.iscrediblebecausebothPatandChrismakepromises.D.isnotcrediblebecausethefinaldecisionrestswithJordan,notChris.133.Refertothefigureabove.Fromthedata,onecaninferthatspendingonA.publicgood1;toolargeB.publicgood3;optimalC.publicgood2;toosmallD.publicgood1;optimalis.134.135.136.Refertothefigureabove.TotaleconomicsurpluscouldbeenhancedbyreallocatingtotalspendingfromA.publicgood2topublicgood3.B.publicgood3topublicgood1.C.publicgood2topublicgood1.D.publicgood1topublicgood3.Refertothefigureabove.Supposea10%reductioninspendingforallpublicgoodsismandated.ThismeansthatthelevelofA.publicgood1willbecomeoptimal.B.publicgood2willmovetowardstheoptimallevel.C.publicgood3willmovetowardstheoptimallevel.D.publicgood2willmoveawayfromtheoptimallevel.Refertothefigureabove.Supposea10%reductioninspendingforallpublicgoodsismandated.ThismeansthatA.twoofthethreepublicgoodswillbeabovetheiroptimallevels.B.therewillbelessgovernmentwhichisalwayssociallybeneficial.C.twoofthethreepublicgoodswillbebelowtheiroptimallevels.D.allthreepublicgoodswillbeattheiroptimallevels.137.WhenprivatefirmscancelinvestmentprogramsbecauseofincreasesintheinterestratecausedbygovernmentborrowingitiscalledA.thereasonforabalancedbudgetamendment.B.crowdingout.C.monetarypolicy.D.fiscalpolicy.138.Ifallrelevantprivateandsocialcostsandbenefitsareincludedinthedemandandsupplycurvesforaparticulargood,thenimposingataxwillA.onlyincreasethepricepaidbyconsumers.B.onlyreducethepricereceivedbyproducers.C.reduceproductionandconsumptionbelowtheefficientlevel.D.havenosignificanteffectonpriceorquantity.139.ThedeadweightlossfromimposingataxonamarketwithoutanexternalityisA.alwaysjustified.B.justifiedifthetaxrevenuecreatesalargersurplusgainfromtheprovisionofapublicgood.C.neverjustified.D.trivialinsize.140.Supposethefederalgovernmentmustturntothefinancialmarketstoborrowinordertomeetitsobligations.Asaresult,interestratesA.risebutnootherimpactoccurs.B.fall,buttheeffectonprivateinvestmentisambiguous.C.riseandprivateinvestmentisreduced.D.fallandgreaterprivateinvestmentoccurs.141.Onereasonthatsomepeopleopposethegovernment'shighdeficitspendingisthattheybelievethatitwilldriveupinterestratesandunderminetheabilityofprivatefirmstoinvest.Thisargumentisbasedon.A.thetendencyoflegislatorstologroll.B.crowdingout.C.rentseeking.D.thecost-benefitprinciple.142.Thisgraphillustratesthemarketforgrocerieswithandwithoutaperunittax:OnthisgraphtheincidenceofthetaxongroceriesA.fallssolelyonthesupplier.B.fallsprimarilyonthesupplier,buttheconsumerbearssomeofthetax.C.isevenlysplitbetweenthesupplierandtheconsumer.D.fallsprimarilyontheconsumer,althoughthesupplierbearssomeofthetax.143.Thisgraphillustratesthemarketforgrocerieswithandwithoutaperunittax:Asalestaxongroceriesof$2.00perunitwouldincreasetheequilibriumtotalpricebyA.morethan$2.00butlessthan$4.00.B.exactly$2.00.C.lessthan$2.00butmorethan$1.00.D.exactly$1.00.144.Thisgraphillustratesthemarketforgrocerieswithandwithoutaperunittax:ThedeadweightlossofthistaxisA.relativelylargebecauseitisataxonanecessity.B.relativelysmallbecauseitisataxonanecessity.C.zerobecausethetaxmoneyisusedtobenefitcitizensofthestate.D.thedistancebetweenthetwosupplycurves.145.Iflow-incomehouseholdsspendalargershareoftheirbudgetonfoodthandohigh-incomehouseholdsataxonfoodisA.aprogressivetax.B.aregressivetax.C.aproportionaltax.D.awaytoredistributefromthewealthytothepoor.146.Abillisbeforeyourstatelegislaturetoincreasethesalestaxonbeer.Thelegislatorwithwhomyouinternhasarguedthatthistaxwillincreasestaterevenuessignificantly,andhasaskedyoutoprovideeconomicanalysistobackhimup.YouwillbeabletosupportthistaxasawaytoincreaserevenueA.unconditionally,becauseanynewtaxwillincreaserevenuessignificantly.B.onlyifyoufindthatdemandforbeerispriceelastic.C.onlyifyoufindthatdemandforbeerispriceinelastic.D.onlyifyoufindthatdemandforbeerisincomeelastic.147.Abillisbeforeyourstatelegislaturetoincreasethesalestaxonbeer.Thelegislatorwithwhomyouinternhasarguedthatthistaxwilldecreasebeerconsumptionsignificantly,andhasaskedyoutoprovideeconomicanalysistobackhimup.YouwillbeabletosupportthistaxasawaytodecreasebeerconsumptionA.unconditionally,becausethelawofdemandstatesthatanincreaseinpricealwayssignificantlyreducesquantitydemanded.B.onlyifyoufindthatdemandforbeerispriceelastic.C.onlyifyoufindthatdemandforbeerispriceinelastic.D.onlyifyoufindthatdemandforbeerisincomeelastic.148.Thetaxingagencyinyourstatewouldliketoimposeasalestaxinawaythatminimizesdeadweightloss.ToachievethisgoalitshouldtaxA.luxuries.B.allgoodsequally.C.necessities.D.goodsbutnotservices.149.Supposethatyouhaveestimatedthatdemandforcigarettesamongadultsisdifferentfromthedemandforcigarettesamongteenagers.Thedemandcurvesthatyouhaveestimatedareshownbelow:Supposethecurrentpriceforapackofcigarettesis$3.00.A$1.00perpacktaxoncigaretteshasbeenproposed.TheproposedtaxwillraiserevenueA.toagreaterextentfromadultsthanfromteenagers.B.toagreaterextentfromteenagersthanfromadults.C.equallyfromteenagersandfromadults.D.onlyifdemandismuchmoreinelasticthanyouhaveestimated.150.Supposethatyouhaveestimatedthatdemandforcigarettesamongadultsisdifferentfromthedemandforcigarettesamongteenagers.Thedemandcurvesthatyouhaveestimatedareshownbelow:Supposethecurrentpriceforapackofcigarettesis$3.00.A$1.00perpacktaxoncigaretteshasbeenproposed.ThisproposedtaxwilldecreasethenumberofcigarettessmokedA.toagreaterextentamongadultsthanamongteenagers.B.toagreaterextentamongteenagersthanamongadults.C.equallyamongteenagersandamongadults.D.onlyifdemandismuchmoreelasticthanyouhaveestimated.151.Supposethatyouhaveestimatedthatdemandforcigarettesamongadultsisdifferentfromthedemandforcigarettesamongteenagers.Thedemandcurvesthatyouhaveestimatedareshownbelow:Supposethecurrentpriceforapackofcigarettesis$3.00.A$1.00perpacktaxoncigaretteshasbeenproposed.Thewillbearthegreatestburdenofthetaxintheadultmarketandthewillbearthegreatestburdenofthetaxintheteenagemarket.A.buyers;sellersB.government;sellersC.buyers;governmentD.sellers;buyers14Key1.Ifagoodcanbeconsumedbyonepersonwithoutreducingtheavailabilityofthegoodtoothers,thisgoodisa(n)A.nonexcludableB.purepublicC.commonD.nonrivalgood.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#1LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods2.TosaythataparticulargoodisnonrivalmeansthatA.ithasnosubstitutes.B.consumerscanenjoyitwithoutpayingforit.C.consumptionofthegoodbyonepersondoesnotdiminishtheavailabilityofthegoodtoothers.D.consumptionofthegoodbyonepersonreducestheavailabilityofthegoodtoothers.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#2LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods3.Ifitisimpossibleorhighlycostlytopreventconsumersfromconsumingagoodwhentheyhavenotpaidforit,thegoodisa(n)A.nonexcludableB.purepublicC.privateD.nonrivalgood.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#3LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods4.CleanairisanexampleofagoodthatisA.neithernonrivalnornonexcludable.B.largelynonrivalandnonexcludable.C.onlynonexcludable.D.onlynonrival.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#4LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods5.Whichofthefollowingitemsisanexampleofanonrivalbutexcludablegood?A.Pay-per-viewmovies.B.Corn.C.Nationaldefense.D.BroadcastTV.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#5LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods6.Aaron'sneighborCliffkeepshisfrontyardwell-manicuredandplantsbeautifulflowerswhichAaronenjoys.IflocallawpreventsClifffromfencinghisyard,thebeautyofCliff'sfrontyardisA.nonrival.B.aprivategood.C.nonexcludable.D.bothnonrivalandnonexcludable.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#6LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods7.TheswingsetatapopularandunfencedpublicparkisA.nonrival.B.nonexcludable.C.acollectivegood.D.apurepublicgood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#7LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods8.Yourstatedepartmentoftransportationisconsideringinstallingtollboothsandgatesononeofthefreewaysthatrunsthroughanunpopulatedpartofthestate.Ifthisisadopted,agoodthatiscurrentlya(n)A.publicgoodwillbecomeaprivategood.B.nonrivalgoodwillbecomearivalgood.C.nonexcludablegoodwillbecomeanexcludablegood.D.rivalgoodwillbecomeanexcludablegood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#8LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods9.Agoodorservicethatisbothhighlynonrivalandhighlynonexcludableisa(n)andagoodorservicethatpossessessomedegree(butnotahighdegree)ofbeingbothnonrivalandnonexcludableisaA.publicgood;purepublicgood.B.purepublicgood;publicgood.C.purepublicgood;privategood.D.publicgood;privategood.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#9LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods10.AgoodorservicethatisrivalbutistosomeextentnonexcludableiscalledaservicethatisnonrivalbutisexcludableisreferredtoasaA.publicgood;privategood.B.commonsgood;publicgood.C.commonsgood;collectivegood.D.publicgood;collectivegood.,andagoodorAACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#10LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods11.AgoodorservicewhichisbothrivalandexcludableisaA.publicgood.B.privategood.C.collectivegood.D.commonsgood.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#11LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods12.ApurepublicgoodisonethatisA.highlynonrivalandnonexcludable.B.slightlynonrivalandnonexcludable.C.nonexcludable.D.highlynonrivalbutonlyslightlynonexcludable.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#12LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods13.AcollectivegoodisonethatisA.toadegreenonrivalbutisexcludable.B.rivalbuttoadegreenonexcludable.C.consumedbymorethanoneperson.D.toadegreebothnonrivalandnonexcludable.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#13LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods14.Ofthefollowing,thebestexampleofapurepublicgoodisA.cableTV.B.anationalpark.C.nationaldefense.D.education.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#14LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods15.SupposethatthelatestIndianaJonesmovieplayedintheatersfirst,whereitwassoldoutduringitsopeningweek.Severalmonthslateritwasavailableonpay-per-viewTV.TwoyearslateritwasshownonCBS,abroadcasttelevisionnetwork.Whenthemoviewasplayingatthetheateritwasagood,whenitwasavailableonpay-per-viewTVitwasaA.private;public;publicgoodandwhenitwasshownonCBSitwasagood.B.private;collective;publicC.collective;private;commonsD.collective;commons;publicAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#15LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods16.SupposethatthelatestIndianaJonesmovieplayedintheatersfirst,whereitwassoldoutduringitsopeningweek.Severalmonthslateritwasavailableonpay-per-viewTV.TwoyearslateritwasshownonCBS,abroadcasttelevisionnetwork.WhenafamilyrentsanIndianaJonesmovieonDVDtowatchtogether,theDVDisaA.publicB.jointlyconsumedprivateC.jointlyconsumedpublicD.privategood.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#16LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods17.AfewyearsagoStanandhiskidsweretheonlypeoplewhofishedinStan'spersonalpond.ThenStanstartedtosellticketstothepublic.Stanleftthepondandthelanditwasontothestateinhiswill,stipulatingthatthelandbeusedasapublicfishingarea.AfterStandiesthepondwillbecomeaA.privateB.commonsC.collectiveD.publicgood.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#17LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods18.AfewyearsagoStanandhiskidsweretheonlypeoplewhofishedinStan'spersonalpond.ThenStanstartedtosellticketstothepublic.Stanleftthepondandthelanditwasontothestateinhiswill,stipulatingthatthelandbeusedasapublicfishingarea.WhenStanstartedtosellticketstothepublictofishinhisponditbecameaA.privateB.commonsC.collectiveD.publicgood.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#18LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods19.AfewyearsagoStanandhiskidsweretheonlypeoplewhofishedinStan'spersonalpond.ThenStanstartedtosellticketstothepublic.Stanleftthepondandthelanditwasontothestateinhiswill,stipulatingthatthelandbeusedasapublicfishingarea.WhenStanandhiskidsweretheonlypeoplefishingintheponditwasaA.privateB.publicC.collectiveD.commonsgood.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#19LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods20.Afreewaywithoutanytollsbetween12amand5amisanexampleofaA.collectiveB.publicC.privateD.commonsgood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#20LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods21.WaterflowinginariverisaA.public;commonsB.public;privateC.public;collectiveD.collective;privategood,butasingleservingbottleofwaterisagood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#21LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods22.AcrowdedbeachwithoutanyentrancefeeisaA.publicB.privateC.purepublicD.commonsgood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#22LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods23.ApatchofediblemushroomsgrowingwildinanationalforestisaA.publicB.privateC.purepublicD.commonsgood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#23LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods24.Whendealingwithpurepublicgoods,A.thegovernmentmustalwaysprovidethem.B.privatefirmswillalwaysprovidethem.C.thegovernmentfrequentlyprovidesthemalthoughprivatefirmsprovidesome.D.privatefirmsprovidenearlyallofthemandthegovernmentprovidesthefewremainingones.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#24LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods25.RadioandbroadcasttelevisionareexamplesofA.collectivegoods.B.privategoods.C.purepublicgoodsprovidedbythegovernment.D.purepublicgoodsprovidedbyprivatefirms.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#25LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods26.Toproperlyjustifythegovernmentalprovisionofapublicgood,itmustbethecasethattheandthat.A.goodisindeedapublicgood;themajorityofvoterswantittobeprovidedB.benefitsexceedthecosts;nolowercostproviderexistsC.votersdesirethegood;nonewtaxeswillbeneededD.benefitsexceedthecosts;amajorityofvotersvaluethegoodequallyAACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#26LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods27.LaneandRileyaretheonlytworesidentsinaneighborhood,andtheysharethesamedriveway.Theywouldliketohavethedrivewaypaved.Thevalueofthepaveddrivewayis$1500toLaneand$1000toRiley.Irrespectiveofwhopaysforthepavingbothpeoplewillbenefitfromit.Whatisthemostacontractorcanchargeforpavingthedrivewayandstillbehiredbyatleastoneofthem?A.$1000B.$1500C.$2000D.$2500AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#27LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood28.LaneandRileyaretheonlytworesidentsinaneighborhood,andtheysharethesamedriveway.Theywouldliketohavethedrivewaypaved.Thevalueofthepaveddrivewayis$1500toLaneand$1000toRiley.Irrespectiveofwhopaysforthepavingbothpeoplewillbenefitfromit.Supposethecostofpavingthedrivewayis$2000,itisforthemtoshareitscost,becausethentheywillhaveatotaleconomic.A.inefficient;shortageof$500B.efficient;surplusof$500C.efficient;shortageof$500D.efficient;surplusof$1000AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#28LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood29.LaneandRileyaretheonlytworesidentsinaneighborhood,andtheysharethesamedriveway.Theywouldliketohavethedrivewaypaved.Thevalueofthepaveddrivewayis$1500toLaneand$1000toRiley.Irrespectiveofwhopaysforthepavingbothpeoplewillbenefitfromit.Relativetothetwo-personscenariodescribed,ifalargenumberofpeoplesharethedriveway,thejointpurchaseofpavingisandtheemerges.A.impossible;tragedyofthecommonsB.lesscostly;maximumeconomicefficiencyC.morelikelytobeaccomplished;free-riderproblemD.moredifficult;free-riderproblemAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#29LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood30.AssumethateachdaytenthousandchildrenwatchSesameStreetonpublictelevisionandthattheeducationalbenefitsofwatchingSesameStreetgenerateprivatebenefitsof$100perchildperyearandapositiveexternalityof$50perchildperyear.NoproductsareadvertisedonSesameStreetbutonceayearthestationsholdapledgedrive.Duringpledgedrivesviewersareaskedtomakevoluntarycontributionstothepublicstationinordertokeeptheprogrammingviable.ThebroadcastofSesameStreetyieldstotalprivatebenefitsof.A.$10,000;$15,000B.$1,000,000;$1,500,000C.$100,000;$150,000D.$1,000,000;$500,000andtotalsocialbenefitsofAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#30LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood31.AssumethateachdaytenthousandchildrenwatchSesameStreetonpublictelevisionandthattheeducationalbenefitsofwatchingSesameStreetgenerateprivatebenefitsof$100perchildperyearandapositiveexternalityof$50perchildperyear.NoproductsareadvertisedonSesameStreetbutonceayearthestationsholdapledgedrive.Duringpledgedrivesviewersareaskedtomakevoluntarycontributionstothepublicstationinordertokeeptheprogrammingviable.SupposethateachparenthasjustonechildwhowatchesSesameStreet.ThatparenthasaprivateincentivetocontributeA.$0B.$50C.$100D.$150duringthepledgedrive.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#31LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood32.AssumethateachdaytenthousandchildrenwatchSesameStreetonpublictelevisionandthattheeducationalbenefitsofwatchingSesameStreetgenerateprivatebenefitsof$100perchildperyearandapositiveexternalityof$50perchildperyear.NoproductsareadvertisedonSesameStreetbutonceayearthestationsholdapledgedrive.Duringpledgedrivesviewersareaskedtomakevoluntarycontributionstothepublicstationinordertokeeptheprogrammingviable.Ifthepublictelevisionstationscollectlessthan$100perchildduringthepledgedrivesitisevidencethatA.thegovernmentsubsidyistoohigh.B.viewersdonottakeexternalitiesintoaccountwhenmakingadonation.C.someviewersarefreeriders.D.viewersdonotvalueSesameStreetasmuchasoriginallyestimated.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#32LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood33.OnesourceoffrictioninthegovernmentalprovisionofapurepublicgoodisthatvotersreceiveofthepublicgoodandhaveA.differentamounts;differentreservationpricesB.differentamounts;thesamereservationpriceC.thesameamount;differentreservationpricesD.thesameamount;thesamereservationpriceforthepublicgood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#33LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood34.CitizensofTinytownareconsideringbuildinganewcitypark.IfeachvoterinTinytownhasareservationpricethatislessthanthetotalcostofthepark,thenA.bydefinition,thebenefitsoftheparkarelessthanthecostsandthustheparkshouldnotbebuilt.B.somesortofcollectiveactionbyvoterswillbenecessarytofundthepark.C.aprivatefirmwillhaveanincentivetobuildthepark.D.theparkwillneverbebuilt.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#34LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood35.Ifalltaxpayerspaythesameamountoftax,thetaxistermeda(n)A.proportionaltax.B.progressivetax.C.headtax.D.perunittax.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#35LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods36.Ifalltaxpayerspaythesamepercentageoftheirincomeintaxes,thetaxistermeda(n)A.proportionaltax.B.progressivetax.C.headtax.D.excisetax.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#36LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods37.Iftaxpayerspayasmallerfractionoftheirincomeintaxesastheirincomesrise,thetaxisandiftaxpayerspayalargerfractionoftheirincomeintaxesastheirincomerise,thetaxisA.regressive;progressiveB.progressive;regressiveC.proportional;progressiveD.regressive;proportionalAACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#37LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods38.Curlypays$12,000intaxesandearns$150,000.Moepays$7,000intaxes.Ifthetaxsystemisproportional,thenMoe'sincomeisA.$56,000.B.$125,000.C.$87,500.D.$98,000.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#38LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods39.Spikepays$14,000intaxeswhileearning$100,000.Aceearns$120,000.Ifthetaxsystemisprogressive,AcewillpaytaxesofA.$15,500.B.morethan$16,800.C.morethan$15,500butlessthan$16,800.D.$16,800.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#39LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods40.Ifgovernmentneedstoraiserevenuestopayforapublicgood,theidealtaxstructurewouldbetotaxA.allcitizensbythesameamount.B.allcitizensinproportiontotheirwillingnesstopayforthepublicgood.C.allcitizensbythesameproportionoftheirincome.D.onlythecitizensthatstatethattheywillusethepublicgood.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#40LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods41.AheadtaxmeanstheamountoftaxpaidisA.thesameforalltaxpayers.B.thesameforallfamilies.C.alinearlyincreasingfunctionofthetaxpayer'sincome.D.thesameforalltaxpayerswhousethepublicgood.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#41LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods42.Ifgovernmentchoosestouseaheadtaxtofinanceaparticularpublicgood,thentheA.percentofincomepaidintaxesisconstant.B.amountoftaxpaidbyeachtaxpayerdeclinesasincomerises.C.percentofincomepaidintaxesdeclinesasincomerises.D.percentofincomepaidintaxesincreasesasincomerises.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#42LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods43.AproportionaltaxresultsinA.alargerpercentageofincomegoingtotaxesasincomerises.B.asmallerpercentageofincomegoingtotaxesasincomerises.C.thesameamountofincomegoingtotaxesasincomerises.D.thesamepercentageofincomegoingtotaxesasincomerises.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#43LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods44.Joeearns$10,000inincomeandpays$1,000intaxeswhileJackearns$30,000andpays$4,000intaxes.ThestructureofthistaxisA.progressive.B.proportional.C.regressive.D.aheadtax.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#44LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods45.SupposethatJoshpays$6,000inincometaxesandMaggiepays$4,000.Iftheyaresubjecttoaprogressivetaxstructure,wecansaythatA.Joshpaysasmallerpercentageofhisincomeintaxes.B.JoshhasahigherincomethanMaggie.C.MaggiehasahigherincomethanJosh.D.JoshandMaggiepaythesamepercentageoftheirincomeintaxes.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#45LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods46.ThecurrentU.S.incometaxsystemrequirestaxpayerstopayahighermarginaltaxrateonhigherlevelsoftaxableincome.Supposethatthetaxrateis10%onthefirst$15,000oftaxableincome,15%onthenext$45,000oftaxableincome,30%onthenext$60,000oftaxableincome,and35%ontaxableincomeabove$120,000.AnincometaxsystemliketheonedescribedisA.progressive.B.regressive.C.proportional.D.progressivewhenincomeislow,thenregressive.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#46LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods47.ThecurrentU.S.incometaxsystemrequirestaxpayerstopayahighermarginaltaxrateonhigherlevelsoftaxableincome.Supposethatthetaxrateis10%onthefirst$15,000oftaxableincome,15%onthenext$45,000oftaxableincome,30%onthenext$60,000oftaxableincome,and35%ontaxableincomeabove$120,000.Supposethatthetaxcodealsoincludesprovisionsthatallowtaxpayerstoreducetheincomeonwhichtheyaretaxed,andthatthoseprovisionsmostoftenapplyonlytothewealthiesttaxpayers.TheseprovisionstendtomakethetaxcodeA.moreregressive.B.moreefficient.C.lessprogressive.D.lessregressive.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#47LearningObjective:14-01Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.Topic:GovernmentProvisionofPublicGoods48.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.ThetotalsocialbenefittoaswimmingpoolinPleasantvilleisA.$1,490.B.$1,000.C.$1,590.D.$1,120.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#48LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood49.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.BuildingtheswimmingpoolwouldA.reduce;thecostsexceedthebenefitstotaleconomicsurplusbecause.B.reduce;taxeswouldhavetobecollectedtobuilditC.increase;thebenefitsexceedthecostsD.increase;thecostscanbepassedtousersfromothertownsAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#49LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood50.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.Franproposesthatthecitybuildthepoolandfinanceitwitha$200taxfromeachvoter.Theoutcomeofthisproposalwillbevotesinfavorandvotesopposedandthemeasurewill.A.5;0;passB.4;1;passC.2;3;failD.3;2;failAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#50LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood51.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.Kyleproposesthatallvoterspay68%oftheirmarginalbenefitintaxestopayforthepool.Theoutcomeofthisproposalisvotesinfavor,votesopposedandthemeasurewill.A.4;1;passB.5;0;passC.0;5;failD.3;2;passAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#51LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood52.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.SupposethatSamproposesallowingaprivatefirmtobuildthepoolthatwouldchargethesameonetimefeetoeveryoneforunlimitedaccesstothepool.TheoutcomewouldbethatthepoolwouldA.bebuiltandthefeewouldbe$200.B.notbebuilt.C.bebuiltandthefeewouldbe$250.D.bebuiltandthefeewouldbe$334.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#52LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood53.TheverysmallcityofPleasantvilleisconsideringbuildingapublicswimmingpoolthatcosts$1,000.Thetableshowsthefivevotersinthecityandtheirmarginalbenefitofaswimmingpool.Ittakesa4/5majoritytopassanytaxmeasureandallvotersmustvote.Ataxequalto68%ofeachtaxpayer'smarginalbenefitswouldprovideapoolandcitizenswoulduseit,whileaprivatefirmwouldprovideapoolandA.allofthe;alloftheB.four;threeC.allofthe;threeD.four;twocitizenswoulduseit.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#53LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood54.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.ThenetsocialbenefitofprovidingthepublicgoodisA.$100.B.$700.C.$900.D.$1,000.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#54LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood55.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.Supposethatthegovernmentaccuratelyknewthethreereservationpricesandthecostofthepublicgood.Toachievetheidealtaxstructureandcollectnomoreintaxrevenuethan$900,eachvotershouldbechargedA.100;reservationpriceB.70;reservationpriceC.20;incomeD.90;reservationpricepercentoftheir.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#55LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood56.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.Sincethegovernmentdoesnotknowandcannotdiscoverthevoters'truereservationprices,itproposesaheadtaxof$300pervoter.TheresultofthereferendumisA.thetaxpassesandthepublicgoodisprovided.B.MaxvotesforthetaxbutKrisandTaylorvoteagainstitanditfails.C.Maxvotesforthetax,KrisvotesagainstitbutTaylor'svoteisuncertain.D.allthreevotersvoteagainstthetax.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#56LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood57.ApublicgoodthatwouldbenefitKaren,Tammy,andMaxhasaonetimeinstallationcostof$900.Thesethreevotersmustapproveanytaxplanbysimplemajorityandallthreewillcastavote.Supposethegovernmentproposesaproportionalincometaxof8%.TheresultofthereferendumwillbethatA.allthreevoterswillvoteforthetax.B.MaxandTaylorwillvoteagainstthetaxbutKriswillvoteforit.C.KrisandMaxwillvoteforthetax,Taylorwillvoteagainstit.D.allthreevoterswillvoteagainstthetax.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#57LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood58.Thetextbookstatesthatempiricalstudieshavefoundthatthedemandforpublicgoodslikepublicparks,environmentalprotectionandpublicsafetyA.isquitepriceinelastic.B.hasasmall,positiveincomeelasticity.C.ispriceelastic.D.hasanincomeelasticityinexcessof1.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#58LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood59.ThedemandcurveforpublicgoodsisconstructedbyA.summingeachvoter'sdesiredquantityofthepublicgoodatvariousreservationprices.B.surveyingvotersonhowmuchofaparticularpublicgoodtheywoulduseatvariousreservationprices.C.summingeachvoter'sreservationpriceforagivenlevelofpublicgood.D.dividingthetotalcostofprovidingthepublicgoodbythenumberofpotentialusers.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#59LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood60.SupposeScott'sdemandforapublicgoodisP=7-.3QandMike'sdemandisP=10-1.5Q.TheequationforsocialdemandforthepublicgoodisA.P=20-3.0Q.B.P=17-1.8Q.C.P=3-1.2Q.D.P=14-.6Q.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#60LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood61.Toderivethemarketdemandcurveforaprivategoodonesumsthe.Forapublicgood,onesumsthe.A.individualquantitiesatvariousprices;individualquantitiesatvariouspricesB.individualpricesatvariousquantities;individualquantitiesatvariouspricesC.individualquantitiesatvariousprices;individualpricesatvariousquantitiesD.individualpricesatvariousquantities;individualpricesatvariousquantitiesAACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#61LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood62.IfvotersA,B,andChavethefollowingdemandcurvesforapubliclibraryPa=5-2Q,Pb=7-.5Q,andPc=2-4Q,thensocialdemandforapubliclibraryisA.P=6-12Q.B.P=15-6Q.C.P=21-1.5Q.D.P=14-6.5Q.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#62LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood63.Whichofthefollowingstatementsabouttheprovisionofpublicgoodsistrue?A.Governmentmustalwaysprovidepublicgoods.B.Theoptimalamountofpublicgoodprovisionisthatlevelatwhichalltaxpayersreceivesomeofthegood.C.Ifthemarginalbenefitofthepublicgoodexceedsthemarginalcosts,moreshouldbeprovided.D.Theoptimalamountofpublicgoodprovisioniswhentotalbenefitsequaltotalcosts.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#63LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood64.Refertothefigureabove.Ifthegoodshownonthegraphsisaprivategoodatapriceof$4marketdemandisA.100B.90C.70D.50units.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#64LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood65.Refertothefigureabove.Assumethatthegoodshownonthegraphsisapublicgood.If40unitsareprovided,totalbenefitequals.A.$7B.$10C.$20D.$30AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#65LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood66.Refertothefigureabove.Ifthegoodshownonthegraphsisapublicgood,demandedwhenpriceis$21andifthegoodinthetableisaprivategood,demandedwhenpriceis$21.A.0;0B.20;0C.20;20D.10;20unitsareunitsareAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#66LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood67Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Fora2-acrepublicpark,themarketreservationpriceisA.$6.B.$8.C.$14.D.$26.peracre.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#67LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood68Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Themarketreservationpriceis$14peracrefora(n)A.2-acreB.4-acreC.6-acreD.8-acrepublicparkAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#68LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood69Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Fora4-acrepublicparkthemarketreservationpriceisA.$6.B.$8.C.$14.D.$20.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#69LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood70Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposethecitycanpurchaselandfortheparkatacostof$20peracre.TheoptimalparksizewouldbeA.2B.4C.6D.8acres.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#70LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood71Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposethecitycanpurchaselandfortheparkatacostof$8peracre.TheoptimalparksizewouldbeA.2B.4C.6D.8acres.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#71LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood72Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposeawealthycitizendonates2acresoflandtothecityandlandcosts$20peracre.TheoptimalparksizeisA.2acres.B.4acres.C.6acres.D.8acres.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#72LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood73Threedifferentvotersdemandcurvesforapublicparkareshownonthegraphsbelow.Supposethatthecityreceivesagrantthatpaysonehalfofthecostofeachacrethecitybuys.Ifthecostoflandis$28peracre,theoptimalparksizeisA.8.B.2.C.4.D.6.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#73LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood74.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Whatisthey-axisinterceptofthevillage'scollectivedemandforfireworks?A.25B.50C.10D.1000AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#74LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood75.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Whatisthex-axisinterceptofthevillage'scollectivedemandforfireworks?A.25B.50C.100D.500AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#75LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood76.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Suppose10fireworksunitshavebeensetoff.Whatisthemarginalcostofprovidingonemoreunitatthefireworksshow?A.0B.10C.25D.100AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#76LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood77.The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Thesignificanceofthepriceof10isthatitA.assistsinreadingthegraphbyindicatingtheunits.B.isthemarginalcostofprovidingonemoreunitoffireworks.C.istheaveragecostofproviding25unitsoffireworks.D.istheminimumper-residentcontributionnecessarytohostafireworksdisplay.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#77LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood78The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:TheresidentsofTowneburgwouldbewillingtopayatotalofforthefirstunitoffireworksandthetotalcostofprovidingthatfirstunitis.A.$1000;$1,010B.$1,010;$1,100C.$960;$100D.$960;$1,010AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#78LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood79The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:TheresidentsofTowneburgwouldbewillingtopayatotaloffireworksandthemarginalcostofprovidingthetwenty-fourthunitisA.$20;$200B.$20;$10C.$40;$200D.$40;$10forthetwenty-fourthunitof.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#79LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood80The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:TheresidentsofTowneburgwouldbewillingtopayatotaloffireworksandthemarginalcostofprovidingthetwenty-fifthunitisA.$10;$100B.$0;$10C.$20;$10D.$0;$20forthetwenty-fifthunitof.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#80LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood81The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:SupposethatTowneburgcanonlyblastoffwholenumbersoffireworksunits.TheoptimalnumberofunitsatTowneburg'sfireworksdisplayisA.10B.20C.24D.48AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#81LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood82The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:CheapCharlieisoneofTowneburg's20residents.WhileCharlieenjoysfireworksasmuchasthenextTowneburger,whenthefireworksfund-raisingcampaignkicksoff,heclaimstohatethem.CheapCharlieistryingtoA.freeride.B.rentseek.C.forcethevillagetobemoreefficient.D.log-roll.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#82LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood83The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:CheapCharlieisoneofTowneburg's20residents.WhileCharlieenjoysfireworksasmuchasthenextTowneburger,whenthefireworksfund-raisingcampaignkicksoff,heclaimstohatethem.Asaresult,relativetoasituationinwhichCharlieistruthful,theefficientleveloffireworksprovisionisA.less.B.greater.C.less,butthesameamountwillbeprovided.D.thesame,butlesswillbeprovided.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#83LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood84The20residentsofthevillageofTowneburgareconsideringhostingafireworksshownextsummer.Thetotalcostoftheshowisestimatedtobe$1,000+$10perunit.Eachresident'sdemandforfireworksisidentical:P=50-2*unitsasshownbelow:Supposethattheunitsofthefireworksdisplayaremeasurednotbythenumberofunitsoffireworksbutbythenumberofpeoplewhowatchthem.AssumethatTowneburgroadsarenevercongestedandthatthedisplaywillbeshownoveralargebodyofwater.IfthatisthecaseA.marginalcostisstill10buttherewillbemorefreeriders.B.marginalcostiszero.C.nothingisdifferentintheeconomicanalysis.D.marginalcostswillincreasewiththenumberofviewers.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#84LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood85.Formanypurepublicgoodslikefireworksdisplays,weatherforecasts,andtelevisionbroadcaststhemarginalcostofservingonemoreconsumeris.A.zero;provisionisinfinite.,andthereforetheoptimalquantityoccurswhenB.determinedbyaveragecostratherthanmarginalcost;priceequalsaveragecost.C.greaterthanaveragecost;governmentprovidesthegood.D.zero;marginalbenefitequalszero.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#85LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood86.Supposethatthemarginalcostofprovidingpublictelevisionservicetoonemorevieweriszero.Ifthisserviceisprovidedtoeachvieweratapriceequaltoitsmarginalcost,A.thetelevisionstationwillhaveanincentivetoprovidetheoptimallevelofprogramming.B.Totalrevenueswillbezero.C.Totalrevenueswillbepositivewhentherearefewviewers,butwilldeclineasmoreviewerstunein.D.Thetelevisionstationwillearnzeroeconomicprofit.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#86LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood87.SupposethataprivatemonopolistissupplyingagoodthatisnonrivalbutexcludabletoamarketwithdemandofP=24-3Q.Ifthemarginalcostofprovidingthisgoodiszerobutthefirmcharges$18,themonopolistwillprovideA.2;8B.6;8C.2;2D.4;2unitsandtheefficientoutputisunits.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#87LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood88.HBOshowsmovieswithoutcommercialinterruptiontopeoplewhopayfortheirservice.ThisisbecauseHBOA.canexcludenonpayingviewers.B.executivesdecidedtodifferentiatethemselvesfromothernetworks.C.showsonlymoviesthatareveryinexpensivetorent.D.issubsidizedbythegovernment.AACSB:ReflectiveThinkingBlooms:AnalyzeDifficulty:2MediumFrank-Chapter14#88LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood89.Accordingtothetextbook,theprivateprovisionofradioandtelevisionmaynotachieveasociallyefficientoutcomebecauseA.consumersdon'tpayfortheentertainment.B.thegovernmentstrictlyregulatesthemarket.C.increasingly,radioandtelevisionstationsaremonopolies.D.programsarechosenonthebasisofaudiencesizeratherthanthevaluetotheaudience.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#89LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood90ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Ifviewingtheboxingshowwasfreetoanyconsumerwhotunedin,whatwouldbetheeconomicsurplus?A.$25millionB.$50millionC.$225millionD.$625millionAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#90LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood91ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Iftheregulatedpay-per-viewchargeis$5perhousehold,whatwouldbethelosteconomicsurplus?A.$25millionB.$50millionC.$225millionD.$625millionAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#91LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood92ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Withafeeof$15perfight,economicsurpluswouldbelost.A.10million;$25millionB.20million;$225millionC.20million;$25millionD.10million;$225millionhouseholdswillwatchand,relativetofreeviewingintotalAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#92LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood93ThedemandcurveforboxingprogramsonTVisplottedinthegraphbelow:Whenthefightisshownaspay-per-viewtelevisionprogrammingsoviewersarechargedafeetowatch,theoutcomeisbecause.A.efficient;priceswillallocatetheprogramtothosewhovalueitmostB.efficient;themarginalcostiszeroC.inefficient;themarginalcostiszeroD.efficient;otherwisefirmswouldhavenoincentivetoprovideagoodthatpeoplevalueAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#93LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood94.ThedemandcurvefornewmoviesshownonTVisplottedinthegraphbelow:Ifthenewmovieisshownforfree,whatistheeconomicsurplus?A.$4000millionB.$2000millionC.$1280millionD.$720millionAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#94LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood95.ThedemandcurvefornewmoviesshownonTVisplottedinthegraphbelow:Iftheregulatedpay-per-viewchargeis$30perhousehold,whatwouldbethelosteconomicsurplus?A.$4000millionB.$2000millionC.$1280millionD.$720millionAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#95LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood96.ThedemandcurvefornewmoviesshownonTVisplottedinthegraphbelow:Iftheregulatedpay-per-viewchargeisdecreasedfrom$20to$0perhousehold,whatwouldbethegainineconomicsurplus?A.$4000millionB.$320millionC.$1280millionD.$720millionAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#96LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood97.Showingthemovieaspay-per-viewtelevision,soviewersarechargedafeetowatchprogrammingisbecause.A.efficient;priceswillallocatetheresourcetothosewhovalueitmostB.inefficient;firmswillhaveanincentivetoover-chargeforagoodthatpeoplevalueC.inefficient;pay-per-viewresultsingaininsurplusD.inefficient;pay-per-viewresultsinlossinsurplusAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#97LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood98.Thedevelopmentofpay-per-viewtechnologyA.convertedacollectivegoodintoaprivategood.B.allowsconsumerstoseemoviesthatwerepreviouslyunavailableforseveralyears.C.convertedapublicgoodintoacollectivegood.D.hasmadeallconsumersworseoff.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#98LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood99.AnInternetsitethatmaintainsadatabaseofproductreviewsthatanyonecanaccessandthathasadvertisementbannersisA.aprivategood.B.aprivatelyprovidedpublicgoodsellingitsbyproducttoadvertisers.C.agovernmentprovidedpublicgood.D.aprivatelyprovidedpublicgoodinsearchofdonations.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#99LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood100.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisIfGraceseesWillbuildingthefenceshewouldearnahigherpayoffbyA.helpinghim.B.nothelpinghimbecauseshevaluesthefencebylessthandoesWill.C.anuncertainamount.Itdependsonwhetheritisasequentialgameorasimultaneousgame.D.nothelpinghimbecauseshewillgetthevalueofthefencewithoutexpendingtheeffort.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#100LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood101.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisWill'sdominantstrategyinthisgameistoA.buildthefence.B.helpbuildthefenceifheobservesGracestartingtobuilditfirst.C.notbuildthefence.D.alternatebetweenhelpingGraceandnothelpingher.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#101LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood102.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisIntheNashEquilibrium,A.WillwillstarttobuildthefenceandthenGracewillcomeovertohelp.B.Willwillbuildthefencebyhimself.C.Afencewillbebuilt,butitisuncertainwhowillbuildit.D.nofencewillbebuilt.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#102LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood103.WillandGracehaveadjoiningunfencedbackyardsandeachhasjustadoptedanewpuppy.Willvaluesafencebetweentheiryardsat$250andGracevaluesafencebetweentheiryardsat$200.Thevalueoftheeffortrequiredtobuildthefenceis$300,whichwillbesplitequallyiftheybothhelpbuildthefence.Ifoneoftheneighborsbeginsbuildingthefencetheothermightormightnotcomeovertohelp.Therefore,theirpayoffmatrixisThisgameisa(n)becauseA.tragedyofthecommons;thebackyardistreatedasacommonareabythepuppies.B.prisoners'dilemma;followingdominantstrategiesleadstoanon-optimalresult.C.exampleoflogrolling;bothneighborsneedtocooperatetoprovidethegood.D.inequitablesituation;GracedoesnotvalueafenceashighlyasdoesWill.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#103LearningObjective:14-02Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.Topic:TheOptimalQuantityofaPublicGood104.TheproblemsofexternalitiesandpoorlyformedpropertyrightsareA.minorinmoderneconomies.B.amongseveralrationalesfortheexistenceofgovernment.C.bettersolvedbyprivateratherthangovernmentaction.D.theonlytwolegitimatereasonsforcreatinggovernment.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#104LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization105.Beyondtheprovisionofpublicgoods,governmentexiststoaddressA.nationaldefense.B.theproblemofdecliningmoralvalues.C.limitingpersonalfreedom.D.externalitiesandpropertyrights.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#105LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization106.ThepresenceofanunregulatednegativeexternalitymeansthattheunregulatedmarketequilibriumoutputisA.efficient.B.toosmall.C.toolarge.D.greaterthandemand.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#106LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization107.GovernmentsubsidizeseducationbecauseA.itisapurepublicgood.B.privatefirmswillnotprovideeducation.C.ofcustomandtradition.D.educationisthoughttohavepositiveexternalities.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#107LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization108.Whenanegativeexternalityispresentinamarket,thegovernmentA.mustregulateit.B.shouldregulateitifthepublicsupportsregulation.C.shouldneverregulatedit.D.shouldregulateitifthebenefitsofregulationexceedthecosts.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#108LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization109.ThejudicialsystemisanexampleofgovernmentA.providingapurepublicgood.B.encouragingapositiveexternality.C.definingandenforcingpropertyrights.D.discouraginganegativeexternality.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#109LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization110.ThemostappropriatelevelofgovernmenttoprovidepublicgoodsisA.local.B.state.C.dependentonthespecificpublicgoodinquestion.D.federal.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#110LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization111.OnejustificationforthecreationofafederallevelofgovernmentisA.theabilitytodeficitspend.B.economiesofscaleintheprovisionofmilitarydefense.C.toencouragelocaldiversityinthetypesofpublicgoodsprovided.D.greaterresponsivenesstothewillofthevoters.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#111LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization112.SupposethataNewEnglandstateissufferingfromacidrain,whichistheresultofsulfurdioxideemissionsfromtheindustriesofsouthernstates,A.theindividualstatescaneasilyreachasolutiontotheproblem.B.afederalsolutionisthemostappropriateone.C.statecourtscanprovideadequateremedies.D.itceasestobeanexternality.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#112LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization113.Accordingtothetextbook,asolutiontotheexternalityofgreenhouseemissionswillbedifficulttoachievebecauseA.thescientificevidenceisweak.B.thetechnologytoreduceemissionsisextremelyexpensive.C.aninternationalpoliticalorganizationisnecessarytoenforcethesolution.D.thetechnologytoreduceemissionsisundeveloped.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#113LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization114.PorkbarrelspendingisA.governmentspendingthatinvolvesagriculture.B.legislationthatcostslessthanthetotalbenefitsbutlackspoliticalsupport.C.anothernameforallspendingbythegovernment.D.legislationthatsignificantlybenefitsaparticulargroupofvotersbutcostsmorethanthebenefitstoallvoters.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#114LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization115.LogrollingreferstoA.legislationthataffectsthetimberindustry.B.thepracticewherebylegislatorssupporteachother'sporkbarrelspending.C.thepracticeofintroducingmanysimilarbillshopingthatoneoftheversionswillbecomelaw.D.thepracticeofattachingacontroversialbilltoalargeappropriationsbill.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#115LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization116.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.TaxesinFatlandiaareA.bothaheadtaxandregressive.B.aheadtax.C.proportional.D.regressive.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#116LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization117.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.Themarginalbenefitofaddingathirdarmybaseequalsthelocalmarginalbenefitof$250,000plus,foratotalof.A.$1,000,000;$1,250,000B.-$2,000,000;-$1,750,000C.-$1,000,000;-$750,000D.$7,000,000;$6.750,000AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#117LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization118.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.Themarginalbenefitofafourtharmybaseequalsthelocalmarginalbenefitof$250,000plus,foratotalof.A.$1,000,000;$1,250,000B.-$2,000,000;-$1,750,000C.-$1,000,000;-$750,000D.$7,000,000;$6.750,000AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#118LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization119.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.SupposethedepartmentofdefenseinFatlandiadecidestoaddtwoadditionalbasesforatotaloffourbases.ThisnumberofbasesisA.exactlyefficient.B.morethanwouldbeefficient.C.fewerthanwouldbeefficient.D.necessarytomaximizetotalbenefits.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#119LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization120.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.SupposethedepartmentofdefenseinFatlandiadecidestoaddtwoadditionalbasesforatotaloffourbasesandNewPorkswickisoneofthestatesthatwillgetabase.Thelocaleconomywillbenefitbyperresident,andeachresident'staxeswillincreaseby.A.$20;$25B.$250;$200C.$25;$20D.$2.50;$2AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#120LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization121.ThestateofNewPorkswickisoneoftenstatesinthedemocraticnationofFatlandia.Eachstatehastenthousandresidents.Althoughincomesvary,eachFatlandianpaysataxequaltothetotalcostofallgovernmentprojectsdividedbythenumberofresidentsinthecountry.Fatlandiacurrentlyhasonearmybaseineachoftwostatesandisconsideringestablishingsomenewones.Anarmybaseadds$250,000toastate'slocaleconomyeachyear.Thetotalcostofonearmybaseisestimatedtobe$1,000,000peryear.Theincreasedsecurityofhavingadditionalarmybasesequals$10,000,000-(3,000,000*thenumberofbases)peryear.SupposethedepartmentofdefenseinFatlandiahasproposedaddingtwoadditionalbasesforatotaloffourbases.Basedsolelyonperpersonlocalbenefitsandtaxincreases,residentsofNewPorkswickwillhaveanetgainifA.abaseisaddedinNewPorkswickbutnotintheotherstate.B.newbasesareinstalledinbothstates.C.nonewbasesareadded.D.atotalofthreenewbasesareaddedonlyifoneisinNewPorkswick.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#121LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization122.ThecombinationofporkbarrelspendingandlogrollingleadstoA.inefficientlylargegovernmentspending.B.thelargestnetbenefitforsociety.C.thequickterminationofprojectsthatarewastefulofirrelevant.D.underprovisionofpublicgoods.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#122LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization123.Whentheawardingofaprizeisbasedonasociallyunproductiveactivity,theresultisA.rent-seeking.B.thewinner'scurse.C.logrolling.D.crowdingout.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#123LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization124.Accordingtothetextbook,inrepeatedexperimentswhena$20billisauctionedsuchthatthetwotopbidspaytheauctioneerandthenthetopbidreceivesthe$20bill,theA.topbidis$1;studentsbidinincrementsof$1.B.topbidis$10;thetotalcostisthen$20.becauseC.Sumofthetoptwobidsfrequentlyexceed$50;thebidderwiththesecondplacebidraisesthebidandhopestheotherbidderquits.D.topbidis$20;the$20billisworthexactly$20.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#124LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization125.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.Ifbothfirmsrefrainfromspendinganythingonlobbyingefforts,theexpectedprofitofthecontractisA.$5million.B.$2.5million.C.$2million.D.$1million.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#125LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization126.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.SupposeMegaCablespends$2onlobbyingandAcmespends$1onlobbying.Ifbothfirmsknowwhattheotherisspending,theexpectedprofittoMegaCableis.A.$4,999,998;-$1B.$5million;-$1C.$2.5million;$2.5millionD.0;$5millionandtoAcmeitisAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#126LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization127.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.SupposeMegaCablespends$2,000,002onlobbyingwhileAcmespends$2,000,001.Ifbothfirmsknowwhattheotherisspending,theexpectedprofittoMegaCableis.A.$5million;0B.$2,999,998;-$2,000,001C.$2.5million;$2.5millionD.$499,998;-$2,000,001andtoAcmeitisAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#127LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization128.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.Ifbothfirmsspend$2.5milliononlobbying,theexpectedprofitofthecontractisA.$5million.B.0.C.$2.5million.D.-$2.5million.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#128LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization129.ThecityofDustinisgoingtograntanexclusivecontracttoprovidecableTVforthenextyear.Theeconomicprofitofthecontractisthoughttobe$5million.MegaCableandAcmearecompetingforthecontract.Thefirmthatspendsthemostonlobbyingwillbeawardedthecontract.ThereasonbothfirmswillcontinuetoescalatespendingonlobbyingeffortsisbecauseA.thosemakingthedecisiondemand"gifts".B.theCEO'softhetwofirmsarerivals.C.spending$1morethanyouropponentmeanswinningthecontract.D.thefirmscanpassthecostsalongtoconsumers.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#129LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization130.PatandChrisarevyingforJordan'sheart,andbothvaluewinningJordan'saffectionat$500.Jordanwillchoosebetweenthembasedsolelyonwhichonespendsthemostmoneyongifts,movies,dinnerandotherenticements.PatandChrisarefullyawareofeachotherandofeachother'sspending.Spendingmustbeinincrementsof$1ormore.Beforethecompetitionbegins,Patdecidestospendupto$250onJordan.IfChrisknowsthatthisisPat'splan,ChrisshouldA.matchPat's$250.B.committospendingamaximumof$251.C.anticipatethatPatwillnotstickwiththeoriginalplantospend$250.D.enterintoaninformalagreementwithPatbywhichbothagreetospendonly$100.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#130LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization131.PatandChrisarevyingforJordan'sheart,andbothvaluewinningJordan'saffectionat$500.Jordanwillchoosebetweenthembasedsolelyonwhichonespendsthemostmoneyongifts,movies,dinnerandotherenticements.PatandChrisarefullyawareofeachotherandofeachother'sspending.Spendingmustbeinincrementsof$1ormore.Patthinksthatthereisa50%chancethatChriswillcontinuetospendmoreonJordanregardlessofthecurrentlevelofspending.SupposethatPathasnowspent$250onJordanandChrishasspent$251.IfPatweretoincreasespendingto$252themarginalcostofthatexpenditurewouldbewhiletheexpectedmarginalbenefitis.A.$252;$250B.$2;$250C.$250;$250D.$250;$500AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#131LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization132.PatandChrisarevyingforJordan'sheart,andbothvaluewinningJordan'saffectionat$500.Jordanwillchoosebetweenthembasedsolelyonwhichonespendsthemostmoneyongifts,movies,dinnerandotherenticements.PatandChrisarefullyawareofeachotherandofeachother'sspending.Spendingmustbeinincrementsof$1ormore.Aftereachhasspent$100,PatsaystoChris,"Let'sbereasonable.IwillpromisetoonlyspendjustalittlemoreonJordanifyoupromisetodothesame."Pat'sstatementA.iscrediblebecauseitiscostlytofake.B.isnotcrediblebecausekeepingthepromisewillnotbeinPat'sbestinterest.C.iscrediblebecausebothPatandChrismakepromises.D.isnotcrediblebecausethefinaldecisionrestswithJordan,notChris.133.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#132LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralizationRefertothefigureabove.Fromthedata,onecaninferthatspendingonis.A.publicgood1;toolargeB.publicgood3;optimalC.publicgood2;toosmallD.publicgood1;optimalAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#133LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization134.135.136.Refertothefigureabove.TotaleconomicsurpluscouldbeenhancedbyreallocatingtotalspendingfromA.publicgood2topublicgood3.B.publicgood3topublicgood1.C.publicgood2topublicgood1.D.publicgood1topublicgood3.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#134LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralizationRefertothefigureabove.Supposea10%reductioninspendingforallpublicgoodsismandated.ThismeansthatthelevelofA.publicgood1willbecomeoptimal.B.publicgood2willmovetowardstheoptimallevel.C.publicgood3willmovetowardstheoptimallevel.D.publicgood2willmoveawayfromtheoptimallevel.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#135LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralizationRefertothefigureabove.Supposea10%reductioninspendingforallpublicgoodsismandated.ThismeansthatA.twoofthethreepublicgoodswillbeabovetheiroptimallevels.B.therewillbelessgovernmentwhichisalwayssociallybeneficial.C.twoofthethreepublicgoodswillbebelowtheiroptimallevels.D.allthreepublicgoodswillbeattheiroptimallevels.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#136LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization137.WhenprivatefirmscancelinvestmentprogramsbecauseofincreasesintheinterestratecausedbygovernmentborrowingitiscalledA.thereasonforabalancedbudgetamendment.B.crowdingout.C.monetarypolicy.D.fiscalpolicy.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#137LearningObjective:14-03Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.Topic:Laws,Regulations,andtheQuestionofCentralization138.Ifallrelevantprivateandsocialcostsandbenefitsareincludedinthedemandandsupplycurvesforaparticulargood,thenimposingataxwillA.onlyincreasethepricepaidbyconsumers.B.onlyreducethepricereceivedbyproducers.C.reduceproductionandconsumptionbelowtheefficientlevel.D.havenosignificanteffectonpriceorquantity.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#138LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?139.ThedeadweightlossfromimposingataxonamarketwithoutanexternalityisA.alwaysjustified.B.justifiedifthetaxrevenuecreatesalargersurplusgainfromtheprovisionofapublicgood.C.neverjustified.D.trivialinsize.AACSB:AnalyticBlooms:RememberDifficulty:1EasyFrank-Chapter14#139LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?140.Supposethefederalgovernmentmustturntothefinancialmarketstoborrowinordertomeetitsobligations.Asaresult,interestratesA.risebutnootherimpactoccurs.B.fall,buttheeffectonprivateinvestmentisambiguous.C.riseandprivateinvestmentisreduced.D.fallandgreaterprivateinvestmentoccurs.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#140LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?141.Onereasonthatsomepeopleopposethegovernment'shighdeficitspendingisthattheybelievethatitwilldriveupinterestratesandunderminetheabilityofprivatefirmstoinvest.Thisargumentisbasedon.A.thetendencyoflegislatorstologroll.B.crowdingout.C.rentseeking.D.thecost-benefitprinciple.AACSB:AnalyticBlooms:UnderstandDifficulty:2MediumFrank-Chapter14#141LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?142.Thisgraphillustratesthemarketforgrocerieswithandwithoutaperunittax:OnthisgraphtheincidenceofthetaxongroceriesA.fallssolelyonthesupplier.B.fallsprimarilyonthesupplier,buttheconsumerbearssomeofthetax.C.isevenlysplitbetweenthesupplierandtheconsumer.D.fallsprimarilyontheconsumer,althoughthesupplierbearssomeofthetax.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#142LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?143.Thisgraphillustratesthemarketforgrocerieswithandwithoutaperunittax:Asalestaxongroceriesof$2.00perunitwouldincreasetheequilibriumtotalpricebyA.morethan$2.00butlessthan$4.00.B.exactly$2.00.C.lessthan$2.00butmorethan$1.00.D.exactly$1.00.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#143LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?144.Thisgraphillustratesthemarketforgrocerieswithandwithoutaperunittax:ThedeadweightlossofthistaxisA.relativelylargebecauseitisataxonanecessity.B.relativelysmallbecauseitisataxonanecessity.C.zerobecausethetaxmoneyisusedtobenefitcitizensofthestate.D.thedistancebetweenthetwosupplycurves.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#144LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?145.Iflow-incomehouseholdsspendalargershareoftheirbudgetonfoodthandohigh-incomehouseholdsataxonfoodisA.aprogressivetax.B.aregressivetax.C.aproportionaltax.D.awaytoredistributefromthewealthytothepoor.AACSB:ReflectiveThinkingBlooms:AnalyzeDifficulty:3HardFrank-Chapter14#145LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?146.Abillisbeforeyourstatelegislaturetoincreasethesalestaxonbeer.Thelegislatorwithwhomyouinternhasarguedthatthistaxwillincreasestaterevenuessignificantly,andhasaskedyoutoprovideeconomicanalysistobackhimup.YouwillbeabletosupportthistaxasawaytoincreaserevenueA.unconditionally,becauseanynewtaxwillincreaserevenuessignificantly.B.onlyifyoufindthatdemandforbeerispriceelastic.C.onlyifyoufindthatdemandforbeerispriceinelastic.D.onlyifyoufindthatdemandforbeerisincomeelastic.AACSB:ReflectiveThinkingBlooms:AnalyzeDifficulty:3HardFrank-Chapter14#146LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?147.Abillisbeforeyourstatelegislaturetoincreasethesalestaxonbeer.Thelegislatorwithwhomyouinternhasarguedthatthistaxwilldecreasebeerconsumptionsignificantly,andhasaskedyoutoprovideeconomicanalysistobackhimup.YouwillbeabletosupportthistaxasawaytodecreasebeerconsumptionA.unconditionally,becausethelawofdemandstatesthatanincreaseinpricealwayssignificantlyreducesquantitydemanded.B.onlyifyoufindthatdemandforbeerispriceelastic.C.onlyifyoufindthatdemandforbeerispriceinelastic.D.onlyifyoufindthatdemandforbeerisincomeelastic.AACSB:ReflectiveThinkingBlooms:AnalyzeDifficulty:3HardFrank-Chapter14#147LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?148.Thetaxingagencyinyourstatewouldliketoimposeasalestaxinawaythatminimizesdeadweightloss.ToachievethisgoalitshouldtaxA.luxuries.B.allgoodsequally.C.necessities.D.goodsbutnotservices.AACSB:ReflectiveThinkingBlooms:AnalyzeDifficulty:3HardFrank-Chapter14#148LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?149.Supposethatyouhaveestimatedthatdemandforcigarettesamongadultsisdifferentfromthedemandforcigarettesamongteenagers.Thedemandcurvesthatyouhaveestimatedareshownbelow:Supposethecurrentpriceforapackofcigarettesis$3.00.A$1.00perpacktaxoncigaretteshasbeenproposed.TheproposedtaxwillraiserevenueA.toagreaterextentfromadultsthanfromteenagers.B.toagreaterextentfromteenagersthanfromadults.C.equallyfromteenagersandfromadults.D.onlyifdemandismuchmoreinelasticthanyouhaveestimated.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#149LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?150.Supposethatyouhaveestimatedthatdemandforcigarettesamongadultsisdifferentfromthedemandforcigarettesamongteenagers.Thedemandcurvesthatyouhaveestimatedareshownbelow:Supposethecurrentpriceforapackofcigarettesis$3.00.A$1.00perpacktaxoncigaretteshasbeenproposed.ThisproposedtaxwilldecreasethenumberofcigarettessmokedA.toagreaterextentamongadultsthanamongteenagers.B.toagreaterextentamongteenagersthanamongadults.C.equallyamongteenagersandamongadults.D.onlyifdemandismuchmoreelasticthanyouhaveestimated.AACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#150LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?151.Supposethatyouhaveestimatedthatdemandforcigarettesamongadultsisdifferentfromthedemandforcigarettesamongteenagers.Thedemandcurvesthatyouhaveestimatedareshownbelow:Supposethecurrentpriceforapackofcigarettesis$3.00.A$1.00perpacktaxoncigaretteshasbeenproposed.Thewillbearthegreatestburdenofthetaxintheadultmarketandthewillbearthegreatestburdenofthetaxintheteenagemarket.A.buyers;sellersB.government;sellersC.buyers;governmentD.sellers;buyersAACSB:AnalyticBlooms:ApplyDifficulty:3HardFrank-Chapter14#151LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.Topic:WhatShouldWeTax?14SummaryCategory#ofQuestionsAACSB:Analytic146AACSB:ReflectiveThinking5Blooms:Analyze5Blooms:Apply92Blooms:Remember24Blooms:Understand30Difficulty:1Easy24Difficulty:2Medium31Difficulty:3Hard96Frank-Chapter14151LearningObjective:14-3901Usetheconceptsofrivalryandexcludabilitytodistinguishamongprivategoods;publicgoods;collectivegoods;andcommonsgoods.LearningObjective:14-6402Showhoweconomicconceptscanbeusedtofindtheoptimalquantityofapublicgoodanddescribethewaysinwhichprivatefirmscansupplypublicgoods.LearningObjective:14-3403Analyzethetypesofefficienciesandinefficienciesthatareassociatedwiththeprovisionofpublicgoods.LearningObjective:14-04Discussthecriteriathatshouldbeappliedtotaxationinordertopromoteefficiency.14Topic:GovernmentProvisionofPublicGoods39Topic:Laws,Regulations,andtheQuestionofCentralization34Topic:TheOptimalQuantityofaPublicGood64Topic:WhatShouldWeTax?14