micro exam 4
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Sophia receive?
$0
Refer to Table 11-3. If the marginal cost of police protection is constant at $72 per person-hour, what is the efficient level of police protection to provide?
18 person-hours
Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $500. How many ferry trips should there be to maximize the total surplus of the four business owners?
3
Before the flu season begins, Jeremy gets a flu shot. As a result, Jeremy and several of his friends and relatives avoid the flu for the entire flu season. It would make sense to argue that a. flu shots provide a positive externality, and that flu shots should be subsidized. b. if flu shots are not subsidized, then the number of people getting flu shots will be smaller than the socially optimal number. c. the externality generated by flu shots is more like the externality generated by education than the externality generated by pollution. d. All of the above are correct.
All of the above are correct
A stairwell in a certain office building is always congested at 12:00 p.m. and 1:00 p.m. The congestion is so bad that people have been complaining to the building's owner. Which of the following methods would be the most efficient way of reducing congestion?
Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the stairs the most will be the ones who use the stairwell at peak times.
Which of the following statements is not correct?
Economists typically prefer regulations to corrective taxes because regulations provide more incentives for firms to seek continued reductions in pollution.
A positive externality occurs when
Jack receives a benefit from John's consumption of a certain good.
Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that
Jenny pays Abe $300 to give the dog to his parents who live on an isolated farm.
Which of the following is an example of a positive externality?
Mary not catching the flu from Sue because Sue got a flu vaccine
Refer to Figure 10-3. At the private market outcome, the equilibrium price will be
P1
Refer to Figure 10-7. Which quantity represents the social optimum for this market?
Q3
Refer to Figure 10-9, Panel (c). The market equilibrium quantity is
Q4, and the socially optimal quantity is Q5.
Which of the following is not a reason why government agencies subsidize basic research?
The government wants to attract the brightest researchers away from private research firms.
An economics professor, upset about the rising cost of textbooks, proposed that his department purchase 50 copies of a statistics book so the students in the statistics class would not have to purchase their own books but rather could borrow a book for the semester and then return it for the next class to use. Which of the following strategies would not prevent a common resource problem with the textbooks?
The textbooks are placed in a common area of the department so students can borrow and return them as needed.
Which of the following statements about the Coase theorem is true?
Underlying the results of the Coase theorem is the idea that private parties can bargain without cost over the allocation of resources.
Which of the following items is not an example of the type of good represented by Box D?
an uncongested toll road
The Tragedy of the Commons can be corrected by
assigning property rights to individuals.
The externality associated with technology spillovers
can be internalized, potentially, through patent protection.
The Great Lakes are
common resources
The impact of one person's actions on the well-being of a bystander is called
externality
Suppose that alcohol consumption creates a negative externality. What can the government do to equate the equilibrium quantity of alcohol and the socially optimal quantity of alcohol?
impose a tax on alcohol that is equal to the per-unit externality
Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates
negative externalities.
A traffic light at an intersection is
not rival and not excludable in consumption.
The social value of the 4th unit of output that is produced
private value + external benefit
An externality
results in an equilibrium that does not maximize the total benefits to society.
A vacation home in Malibu is
rival in consumption and excludable.
If education produces positive externalities and the government does not intervene in the market, we would expect
the equilibrium quantity to be lower than the optimal level
A lighthouse might be considered a private good if
the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse.
When a particular negative externality affects a very large number of people, it is likely that
the solution to externalities suggested by the Coase theorem will not work.
Which of the following problems can not be alleviated by a gasoline tax?
the undersupply of goods that produce positive externalities
Government policy can potentially raise economic well-being
when a good does not have a price attached to it
