ECN 441 Exam 1

What property must a good satisfy to be a pure public good? (A) it must be nonrival in consumption (B) it must be rival in consumption (C) it must be nonrival in production (D) it must be rival in production

(A) it must be nonrival in consumption

Public Goods: (A) are likely to be underprovided by the private sector due to the free rider problem (B) are likely to be overprovided by the private sector due to the free rider problem (C) can only be provided by the public sector, while private goods can only be provided by the private sector (D) cannot be provided by the private sector because they are rival in consumption

(A) are likely to be underprovided by the private sector due to the free rider problem

The value of altruistic and communal behavior in society is: (A) social capital (B) human capital (C) the benefits index (D) the human factor

(A) social capital

Suppose the government taxes the rich to distribute money to the poor. Which of the following is an example of an efficiency loss (A) Rich people take home less of the money from their jobs because of the tax (B) Rich people don't work as hard because of the tax (C) poor people are better off because of the redistribution (D) poor people work just last as hard because they still need to make ends meet

(B) Rich people don't work as hard because of the tax

Government may not be able to determine the optimal amount of a public good because: (A) it is easier to determine the costs and benefits associated with a public good than those associated with a private good (B) it is easier to determine the costs and benefits associated with private goods than those associated with public goods (C) the quantity of public goods provided by private parties is zero (D) there is no optimal mix of public and private goods

(B) it is easier to determine the costs and benefits associated with private goods than those associated with public goods

If it is not possible to prevent potential users from consuming or having access to the benefit of a good, that good is: (A) excludable (B) non-excludable (C) purely rival (D) partially rival

(B) non-excludable

The three problems facing a government trying to determine the optimal quantity of a public good include all of the following EXCEPT: (A) preference revelation because individuals may not tell the government their true valuation of the public good (B) preference knowledge because individuals may not know their true valuation of the public good (C) preference implementation because it is hard to produce public goods in practice (D) preference aggregation because it is difficult to add up the preferences of millions of citizens

(B) preference knowledge because individuals may not know their true valuation of the public good

The under provision of public goods by a private market is characterized by the: (A) holdout problem (B) assignment problem (C) free rider problem (D) irrationality problem

(C) free rider problem

Suppose many potential donors reduce their annual gift in response to government grants to local medical research projects: This is an example of the problem associated with: (A) measuring preferences for the public good (B) crowding out of private provision (C) measuring the costs and benefits of public goods (D) crowding in of public provision

(D) crowding in of public provision

Which of the following is TRUE when there is optimal provision of a public good? (A) marginal cost equals marginal rate of substitution for each consumer (B) each consumer's surplus equals marginal cost (C) total consumer surplus equals marginal cost (D) the sum of all consumers' marginal rates of substitution equals marginal cost

(D) the sum of all consumers' marginal rates of substitution equals marginal cost

Which of the following would best be characterized as a public good? A. A road B. A house C. A car Food D. An office building

A. A road

_____ arise whenever the actions of one party make another party worse or better off, yet the first party neither bears the cost nor receives the benefits of doing so. A. Externalities B. Market failure C. Internalities D. Moral hazard

A. Externalities

Which of the following refers to the property of dominance? A. If one choice is preferred by all voters, then the aggregation mechanism must be such that this choice is made by society. B. If choice A is preferred to choice B and choice B is preferred to choice C, then A must be preferred to C. C. Choices must satisfy the condition that if one choice is preferred to another, then the introduction of a third choice will not change that ranking. D. If voters for one choice feel more strongly than do voters for another choice, then the aggregation mechanism must be such that the choices are weighted accordingly.

A. If one choice is preferred by all voters, then the aggregation mechanism must be such that this choice is made by society.

Which of the following is a system by which individuals report their willingness to pay for the next incremental unit of a public good and the government charges them that amount to finance this public good? A. Lindahl pricing B. referendum C. access pricing D. voter initiative

A. Lindahl pricing

Which of the following is NOT consistent with nonsatiated preferences? A. Lisa prefers five hamburgers to six hamburgers. B. Ron likes to take home leftover hamburgers for later use. C. Kevin enjoys the third hamburger more than the fourth hamburger. D. Maria prefers four hamburgers to three hamburgers

A. Lisa prefers five hamburgers to six hamburgers.

Suppose that the government proposes taxing Peter to pay Paul. The goal of this intervention could be best characterized as which of the following? A. Redistribution B. Increasing market efficiency C. Correcting a market failure D. Achieving competitive equilibrium E. None of the above

A. Redistribution

Graphically, the budget constraint can be described as: A. a downward sloping line. B. the slope being the difference between the prices of the goods. C. the slope being the sum of the prices of the goods. D. the slope being the product of the prices of the goods.

A. a downward sloping line.

Two economic variables are _____ if the movement of one causes movement of the other. A. causally related B. uncorrelated C. casually related D. correlated

A. causally related

If one person consumes a good, so that no other person can consume it at all, then that good is: A. purely rival. B. partially rival. C. nonexcludable. D. excludable.

A. purely rival.

Which is a property of a private good, like a sandwich? A. rival in consumption B. non-excludable C. subject to the free rider problem D. non-rival in consumption

A. rival in consumption

Which action can be best described by the warm glow model? A.making a large donation to a charitable organization to gain acceptance from friends. B. not being able to consume a private good and blaming the government for it. C. using a national park without contributing. D. making a donation to a charitable organization to reduce tax obligations

A.making a large donation to a charitable organization to gain acceptance from friends.

Under TANF your state provides an income guarantee of $5,000 and a benefit reduction rate of 40%. The typical recipient can work up to 2,000 hours per year at a wage of $10 per hour. By how much is the benefit reduced if the recipient works 300 hours per year? A. $600 B. $1,200 C. $3,000 D. $1,800

B. $1,200

_____ is a problem that causes the market economy to deliver an outcome that does not maximize efficiency. A. Externalities B. Market failure C. Internalities D. Moral hazard

B. Market failure

_____ tools refer to the set of tools designed to understand the mechanics behind economic decision making A. Data B. Theoretical C. Efficiency D. Empirical

B. Theoretical

Suppose a downtown business owner wants to convince the owners of nearby businesses to renovate their buildings to make the downtown area more attractive to shoppers. The problem that is likely to prevent this plan from going into action is called the: A. irrationality problem B. free rider problem C. crowding out problem D. assignment problem

B. free rider problem

Which factor is likely to prevent private market forces from providing the optimal amount of a public good? A. non-satiated preferences B. the free rider problem C. little to no difference among individuals in their demand for the public good D. large differences among individuals in their demand for the public good

B. the free rider problem

Which of the following is TRUE when a consumer is maximizing her utility? A.She consumes halfway between the two intersections of her budget constraint and indifference curve. B.She consumes at the point at which her budget constraint is tangent to her indifference curve. C.She consumes where the budget constraint intersects the midpoint of her indifference curve. D. She consumes at the point at which the slope of her indifference curve is zero.

B.She consumes at the point at which her budget constraint is tangent to her indifference curve.

Which type of government intervention can be used to increase the price for private sales or purchases of goods that are overproduced? A. Public financing of private provision B. Restrictions or mandates of private sale or purchase C. Taxes D. Subsidies E. Public provision

C. Taxes

Suppose that the competitive equilibrium does not lead to the efficiency-maximizing outcome. Which of the following statements is true? A. Government intervention will increase efficiency. B. Government intervention will reduce efficiency. C. Government intervention may increase or decrease efficiency. D. Government intervention will not affect efficiency.

C. Government intervention may increase or decrease efficiency.

In 1996, legal changes reduced the ability of noncitizens to benefit from cash welfare programs. Evidence on the resulting changes in charitable support by churches suggests that: A. crowd-out is significant since there was no difference in the charitable spending of churches in high-immigrant areas and those in low-immigrant areas. B. crowd-out is insignificant since there was no difference in the charitable spending of churches in high-immigrant areas and those in low-immigrant areas. C. crowd-out is significant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas. D. crowd-out is insignificant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas.

C. crowd-out is significant because churches in high-immigrant areas increased their charitable spending much more than churches in low-immigrant areas.

You observe in the data that two variables move together. However, since you'd like to know whether a movement in one variable causes movement in the other, you must solve a(n) A. social efficiency maximization problem. B. social welfare maximization problem. C. identification problem. D. model misspecification problem. E. utility maximization problem.

C. identification problem.

"Contracting out" is an approach through which government: A. mandates that individuals pay for public goods through the private sector instead of using tax dollars to finance their provision. B. is responsible for private goods but uses taxpayer money to produce them. C. is responsible for public goods, but hires private-sector firms to produce them. D. holds private business firms financially responsible for the provision of public goods.

C. is responsible for public goods, but hires private-sector firms to produce them.

If government provision of a public good results in an equal reduction in the privately provided amount of that good, then: A. private provision is not crowded out. B. the warm glow effect caused an increase in the net amount of the public good. C. private provision is fully crowded out. D. private provision is partially crowded out.

C. private provision is fully crowded out.

Assume private individuals are already providing some quantity of a public good in the absence of government intervention. If government begins to provide the public good, it is likely that: A. taxpayers will refuse to support the provision of a public good that is already being provided in the private sector. B. private provision will be replaced by public provision, reflecting crowding in. C. private provision will be replaced by public provision, reflecting crowding out. D. private provision will be unaffected and the amount of the public good will substantially increase.

C. private provision will be replaced by public provision, reflecting crowding out.

Which of the following is a ballot measure that allows citizens to vote on state laws or constitutional amendments that have already been passed by the state legislature? A. recall B. arrow vote C. referendum D. voter initiative

C. referendum

Which of the following activities is most likely to impose a negative externality? A. riding a bicycle B. going to a movie C. smoking D. drinking coffee

C. smoking

Health care reform implemented in Massachusetts in 2006 provides an example of: A. a private sector solution to the free rider problem. B. awarding government contracts without competitive bidding. C. successful contracting out. D. unsuccessful contracting out.

C. successful contracting out.

Which of the following is a reason for government to intervene in market economies? A. To redistribute income or wealth among individuals B. To alleviate poverty C. To enhance economic efficiency D. All of the above

D. All of the above

Which of the following are questions answered by public finance? A. When should the government intervene in the economy? B. How might the government intervene? C. What is the effect of those interventions on economic outcomes? D. Why do governments choose to intervene in the way that they do? D. All of the above.

D. All of the above.

Suppose you wish to determine whether exercising increases academic achievement. What would be the best approach to take? A. Compare the achievements of athletes with those of nonathletes. B. Compare yourself with a friend who exercises less. C. Compare the achievements of baseball players with those of track and field athletes. D. Compare treatment and control groups in a randomized trial.

D. Compare treatment and control groups in a randomized trial.

_____ tools refer to the set of tools designed to analyze data and answer questions raised by theoretical analysis A. Efficiency B. Theoretical C. Abstract D. Empirical

D. Empirical

If two measures, A and B, are correlated, which is definitely TRUE? A. A causes B. B. B causes A. C. There is no causation between A and B. D. It is possible that there is a causal relationship between A and B

D. It is possible that there is a causal relationship between A and B

What property must a good satisfy to be a pure public good? A. It must be rival in consumption. B. It must be nonrival in production. C. It must be rival in production. D. It must be nonrival in consumption.

D. It must be nonrival in consumption.

What is the name of the social assistance program that provides cash payments to single parents whose income is below a specified level? A. Mainstream Vouchers B. Emergency Food Assistance Program C. Supplemental Nutrition Assistance Program D. Temporary Assistance for Needy Families

D. Temporary Assistance for Needy Families

In 1997, representatives from 170 nations met in Kyoto, Japan, to discuss global warming, which is caused by the: A. attempts by various governments to reduce acid rain. B. natural conversion of carbon dioxide into oxygen. C. use of renewable sources of energy. D. burning of fossil fuels such as coal and oil

D. burning of fossil fuels such as coal and oil

Two economic variables that move together are considered: A. causal. B. uncorrelated. C. casual. D. correlated.

D. correlated.

Which of the following can be defined as the use of data and statistical methodologies to measure the impact of government policy on individuals and markets? A. constrained utility maximization B. welfare economics C. a balanced budget requirement D. empirical public finance

D. empirical public finance

Business improvement districts have tended to be effective when: A. local businesses merge, aligning their interests. B. business owners are altruistic C. there is substantial social capital in the business district. D. laws allow businesses to overcome the free rider problem.

D. laws allow businesses to overcome the free rider problem.

If a good becomes less valuable as a result of one consumer's use of the good, but does not become worthless to other consumers, that good is: A. purely rival. B. partially excludable. C. purely excludable. D. partially rival.

D. partially rival

Which type of approach does the Environmental Protection Agency take toward resolving externality problems? A. free market solutions B. military action C. Coasian bargaining D. public-sector solutions

D. public-sector solutions

Suppose that the government were to establish a federally funded health care service for everyone, where the government directly paid doctors and medical practitioners. This would be an example of which of the following types of intervention? A. Public financing of private provision B. Restriction or mandate of private sale or purchase C. Tax D. Subsidy E. Public provision

E. Public provision

Toxic waste production of firms is an example of which of the following? a. Negative production externality and negative consumption externality b. Negative production externality c. Positive production externality d. Positive consumption externality e. Negative consumption externality

b. Negative production externality

In general, which of the following is true? a. Private markets overprovide public goods. b. Private markets underprovide public goods c. Private markets provide the socially optimal amount of public good. d. Public goods must be priced at more than twice their price in the private market in order to provide the socially optimal amount. e. Both b and d are correct.

b. Private markets underprovide public goods

Suppose you are willing to pay $6,000 for a car but pay only $4,000 for the car. Your consumer surplus is equal to a. $2,000 b. $3,000 c. $4,000 d. $6,000 e. None of the above

a. $2,000

Cable television is which of the following? a. Excludable but not rival b. Rival but not excludable c. Both rival and excludable d. Neither rival nor excludable e. Altruistic

a. Excludable but not rival

How does a decrease in income change the budget constraint? a. It shifts the budget constraint inward. b. It shifts the budget constraint outward. c. The budget constraint does not change. d. The vertical intercept decreases while the horizontal intercept remains the same, making the budget constraint flatter. e. The vertical intercept is unchanged while the horizontal intercept decreases, making the budget constraint steeper.

a. It shifts the budget constraint inward.

To maximize social welfare, which of the following must always be true? a. Marginal social benefit equals marginal social cost. b. Marginal private benefit equals marginal social cost. c. Marginal social benefit equals marginal private cost. d. Marginal private benefit equals marginal private cost. e. Both a and d

a. Marginal social benefit equals marginal social cost.

Suppose that the city manager says that everyone lied about how much he or she would value a proposed city project. This is an example of which of the following? a. Preference revelation b. Altruism c. Preference knowledge d. Warm-glow effect e. Preference aggregation

a. Preference revelation

Suppose you hear a politician state that society is only as well off as its worst-off member. Which social welfare function could be best used to model the politician's thoughts? a. Rawlsian social welfare function b. Utilitarian social welfare function c. Samuelsonian social welfare function d. Pareto social welfare function e. None of the above

a. Rawlsian social welfare function

If SUVs produce a negative externality, taxing the buyers of SUVs would do which of the following? a. Shift the private demand curve to the left b. Shift the private demand curve to the right c. Shift the private supply curve to the right d. Shift the private supply curve to the left e. None of the above

a. Shift the private demand curve to the left

Which of the following is defined as the private marginal benefit to the consumers plus any costs associated with the consumption of the good that are imposed on others but for which those others are not fully compensated? a. Total social benefit b. Total private benefit c. Social marginal benefit d. Private marginal benefit e. Net social benefit

a. Total social benefit

Consider hypothetical Bundles A, B, and C. Suppose you prefer Bundle B to Bundle C and are indifferent between Bundle A and Bundle C. Which of the following is true? a. You prefer Bundle B to Bundle A. b. You prefer Bundle A to Bundle B. c. You are indifferent between Bundle A and Bundle B. d. You prefer Bundle C to Bundle B. e. None of the above

a. You prefer Bundle B to Bundle A.

Suppose that to look at the effect of the TANF program on labor supply, researchers were to look at how labor supply by poor households changed over the last 20 years and compare that to changes in the income guarantee over time. This is an example of a. time-series analysis b. cross-sectional regression analysis. c. randomized trial. d. quasi-experiment. e. none of the above.

a. time-series analysis

Suppose you value a piece of pizza at $1.50, while the pizza shop is unwilling to sell a piece of pizza for less than $1.00. At what price would there be an efficient transaction? a. Any price greater than or equal to $1.50 b. Any price greater than or equal to $1.00 and less than or equal to $1.50 c. Any price less than or equal to $1.00 d. Any price less than or equal to $1.00 and greater than or equal to $1.50 e. None of the above

b. Any price greater than or equal to $1.00 and less than or equal to $1.50

Suppose you often come home and find that an uninvited dog has left a calling card in your yard. Determining whose dog is responsible is an example of which of the following? a. Holdout problem b. Assignment problem c. Free-rider problem d. Externality-internalization problem e. Transaction costs and negotiating problems

b. Assignment problem

Suppose you estimate the effect of a treatment using a cross-sectional regression analysis as 10 while the true effect is 15. The difference of 5 represents which of the following? a. Measurement error b. Bias c. Small sample error d. Difference-in-difference estimation e. None of the above

b. Bias

Suppose that in response to government giving grants to local medical research projects, you reduce your annual gift. This is an example of which of the following problems with the public provision of a public good? a. Measuring preferences for the public good b. Crowding-out of private provision c. Measuring the costs and benefits of public goods d. All of the above e. Both a and c

b. Crowding-out of private provision

Which of the following activities is considered altruistic? a. Planting flowers in your yard b. Donating money to the Red Cross c. Going to college d. All of the above e. Both a and b

b. Donating money to the Red Cross

Which of the following is a potential problem with randomized trials? a. The treatment and control groups tend to be very different. b. Randomized trials can raise ethical concerns. c. Randomized trials lead to biased estimates. d. All of the above. e. Both a and c

b. Randomized trials can raise ethical concerns.

Which of the following is a property of a certain shirt? a. Non-rival in consumption b. Rival in consumption c. Non-excludable d. Both a and c e. Both b and c

b. Rival in consumption

Social surplus is defined as a. consumer surplus minus producer surplus. b. consumer surplus plus producer surplus. c. consumer surplus minus the costs of production. d. consumer surplus times producer surplus. e. the total area under the demand curve up to the equilibrium quantity.

b. consumer surplus plus producer surplus.

One implication of diminishing marginal productivity is that a. all inputs must be increased in equal proportions to increase production. b. marginal costs rise with output. c. more skilled workers than unskilled workers should be hired. d. Both a and b. e. None of the above

b. marginal costs rise with output.

Suppose Andrew must decide how to spend $100 on DVDs and video games. The rate at which Andrew is willing to trade DVDs for video games is referred to as the: a. opportunity cost of a DVD. b. marginal rate of substitution. c. marginal rate of transformation. d. budget constraint. e. None of the above.

b. marginal rate of substitution.

Complete the following sentence so that it ALWAYS holds true: In the presence of a positive production externality, ________ is produced relative to the optimal level. a. too much b. too little c. the right amount d. any of the above e. either a or b

b. too little

Which of the following suggests that when an investment has a personal cost but a common benefit, individuals will underinvest? a. Holdout problem b. Assignment problem c. Free-rider problem d. Externality-internalization problem e. Transaction costs and negotiating problems

c. Free-rider problem

Taxing the producer of an externality based on the amount of the externality produced is equivalent to which of the following? a. Subsidizing the consumer b. Subsidizing those outside the market c. Increasing the producer's input costs d. Increasing the benefits of the consumers in the market e. Both c and d

c. Increasing the producer's input costs

The government has passed many school accountability measures that reward schools if their students score highly on standardized tests. Suppose schools respond by manipulating the set of test-takers to increase average scores. This outcome is an example of which of the following? a. Intended effect b. Direct effect c. Indirect effect d. Both a and c e. Both a and b

c. Indirect effect

Which of the following refers to the idea that even if individuals are willing to tell government how much they're willing to pay for a public good, they may not have an idea of what that is? a. Preference revelation b. Preference aggregation c. Preference knowledge d. Warm-glow effecte. Altruism

c. Preference knowledge

Suppose that in order to determine how non-labor income affects labor supply, you give everyone born on an even-numbered day in August of 1979 $1,000 per year and look at how they change their labor supply compared to people born on odd-numbered days in August of 1979. This approach is which of the following? a. Time series analysis b. Cross-sectional regression analysis c. Randomized trial d. Quasi-experiment e. None of the above.

c. Randomized trial

A government payment to an individual or firm that lowers the cost of consumption or production, respectively, is referred to as which of the following? a. Coasian compensation b. Pigouvian package c. Subsidy d. Tax e. Free-rider problem

c. Subsidy

Part I of the Coase Theorem states that when there are well-defined property rights and costless bargaining, then in a market in which there is an externality, which of the following is true? a. The socially optimal level of consumption can be achieved through the use of taxes and subsidies by the government. b. The socially optimal level of consumption can be achieved through the use of quantity restrictions by the government. c. The socially optimal level of consumption can be achieved through negotiations between the affected parties. d. The socially optimal level of consumption cannot be achieved without mediation by the government. e. Both a and b

c. The socially optimal level of consumption can be achieved through negotiations between the affected parties.

The reason the slope of an indifference curve changes is because of the a. diminishing marginal rate of transformation. b. reduction in income as you buy more of one good. c. diminishing marginal rate of substitution. d. non-satiation of preferences. e. none of the above.

c. diminishing marginal rate of substitution.

When firms in a polluting industry have different costs for the technology to reduce pollution, which of the following is efficient? a. Mandating equivalent reductions in pollution from all firms. b.Mandating that each firm reduce pollution up to the point where the marginal cost of reducing pollution is equal to the total social benefit of the reductions for each firm. c.Mandating that each firm reduce pollution up to the point where the marginal cost of reducing pollution is equal to the marginal social benefit of the reductions for each firm. d.Mandating that each firm reduce pollution up to the point where the marginal benefit of doing so is zero. e. Both a and b.

c.Mandating that each firm reduce pollution up to the point where the marginal cost of reducing pollution is equal to the marginal social benefit of the reductions for each firm.

Suppose you spend all your income on books and food, both of which are normal goods. If the price of books increases, which of the following is NOT true? a. Your real income has fallen. b. You will consume fewer books. c. You need to have a higher income to maintain your initial level of utility. d. All of the above. e. None of the above.

d. All of the above.

The government has passed many school accountability measures that reward schools if their students score highly on standardized tests. Suppose schools respond by more efficiently teaching their students. This outcome is an example of which of the following? a. Intended effect b. Direct effect c. Indirect effect d. Both a and c e. Both a and b

d. Both a and c

Taxing noncontributors to finance the provision of a public good will lead to which of the following? a. More accurate preference revelation b. Altruism c. Increased crowding-out of private provision d. Decreased crowding-out of private provision e. Easier preference aggregation

d. Decreased crowding-out of private provision

Which of the following is characterized as a good for which the investment of any one individual benefits everyone in a larger group? a. Normal good b. Superior good c. Inferior good d. Public good e. Both a and b.

d. Public good

Someone states that they're willing to share a smaller amount of total resources if the distribution is more equitable. This person is referring to which of the following? a. Externalities b. Achieving a competitive equilibrium c. Market failure d. The equity-efficiency trade-off e. Both a and c

d. The equity-efficiency trade-off

If individuals care about the outcomes of others as well as themselves, economists refer to them as which of the following? a. Free riders b. Utility maximizers c. Irrational d. Actuarially adjusted e. Altruistic

e. Altruistic

Corrective taxation is best used when which of the following is true? a. Internalizing the externality is difficult. b. The government cannot allocate property rights. c. There are well-defined property rights and costless bargaining. d. All of the above e. Both a and b

e. Both a and b

If government knows the private and social benefit and cost curves associated with reducing pollution, which type of instrument for intervention should the government choose? a. Quantity interventions b. Price (tax) interventions c. Direct government provision of the product in question d. None of the above e. Both a and b; they are equivalent

e. Both a and b; they are equivalent

Which of the following is a barrier faced by government in attempting to solve the free rider problem in the provision of public goods? a. Non-altruistic behavior b. Crowding-out of private provision c. Measuring the preferences for public goods d. All of the above e. Both b and c

e. Both b and c

Someone else playing music loudly on the radio in a dormitory the night before your PPOL V371 public finance exam is an example of which of the following? a. Negative production externality and negative consumption externality b. Negative production externality c. Positive production externality d. Positive consumption externality e. Negative consumption externality

e. Negative consumption externality

Consider hypothetical Bundles A, B, C, and D. Suppose you prefer Bundle A to Bundle B. You are indifferent between Bundle A and Bundle C. You prefer bundle D to bundle A. Which of the following is true? a. Bundle A does not lie on the same indifference curve as Bundle C. b. Bundle B lies on the same indifference curve as Bundle D. c. Bundle C lies on the same indifference curve as Bundle D. d. Both b and c. e. None of the above

e. None of the above

Suppose you value a piece of pizza at $1.50, while the pizza shop is unwilling to sell a piece of pizza for less than $2.00. At what price would there be an efficient transaction? a. Any price greater than or equal to $2.00 b. Any price less than $2.00 and greater than $1.50 c. Any price less than $2.00 d. Any price less than or equal to $1.50 e. None of the above

e. None of the above

Which of the following MUST be true? a. Government provision of a public good will perfectly crowd out private contributions. b. The private market will overcome the free rider problem. c. Government provision of a public good will at least partially crowd out private contributions. d. Both b and c are correct. e. None of the above is correct.

e. None of the above is correct.

Suppose your roommate smokes in your apartment, imposing a cost on you. The Coase Theorem suggests that one solution would involve a. the government establishing that your roommate owns the air in your apartment. b. the government establishing that you own the air in your apartment c. the government establishing that it owns the air in your apartment. d. either a, b, or c. e. either a or b.

e. either a or b.

Suppose that the price of pizza increases. The ________ effect means that, holding utility constant, you will consume ________ pizza than you did before. a. income; less b. income; more c. income; the same amount of d. substitution; more e. substitution; less

e. substitution; less