ECO 450 Week 4 Quiz 3 Chapter 4 and 5 – Strayer University NEW

ECO 450 Week 4 Quiz – Strayer

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CHAPTER 4
Public Goods
TRUE/FALSE QUESTIONS
1. Bread is an example of a good that is nonrival in consumption.
2. A pure public good is one for which it is easy to exclude consumers from benefits if they refuse to pay.
3. The marginal social cost of producing another unit of a pure public good will always be positive.
4. To obtain a demand curve for a pure public good, the marginal benefit of each consumer must be summed for each possible quantity produced per time period.
5. If the efficient amount of a pure public good is produced, each person consumes it up to the point at which his or her marginal benefit equals the marginal social cost of the good.
6. In a Lindahl equilibrium, each consumer of a pure public good consumes the same quantity and pays a tax share per unit of the good equal to his or her marginal benefit.
7. If the marginal social cost of a pure public good exceeds its marginal social benefit, additional units of the good can still be financed by voluntary contributions.
8. The free-rider problem is less acute in small groups than it is in large groups.
9. A congestible public good is one for which the marginal cost of allowing an additional consumer to enjoy the benefits of a given quantity is always zero.
10. Television programming is a good example of a price-excludable public good.
11. It is possible to price a pure public good and sell it by the unit.
12. The demand curve for a pure public good is obtained by adding the quantities demanded by each individual consumer at each possible price.
13. A Lindahl equilibrium usually has each participant paying the same tax share per unit of a public good even though their marginal benefit of that unit varies.
14. Internet service is an example of a price-excludable public good.
15. Clubs are a means of providing congestible public goods through markets.
16. A common way to fund a public good is through a government that raises funds through taxation.
17. Private education is an example of a price-excludable public good.
18. A congestible good has no limits in how much it can be consumed.
MULTIPLE CHOICE QUESTIONS
1. A pure public good is:
a. one that can easily be sold by the unit.
b. one that is nonrival in consumption.
c. one whose benefits are not subject to exclusion.
d. both (b) and (c)
2. The marginal cost of providing a certain quantity of a pure public good to an additional consumer after it is provided to any one consumer is:
a. zero.
b. positive and increasing.
c. positive and decreasing.
d. positive and constant.
3. The nonrival property of pure public goods implies that the:
a. benefits enjoyed by existing consumers decline as more consumers enjoy a given quantity of the good.
b. benefits enjoyed by existing consumers are unaffected as more consumers enjoy a given quan¬tity of the good.
c. good cannot be priced.
d. marginal cost of producing the good is zero.
4. The demand curve for a pure public good is:
a. a horizontal line.
b. obtained by adding the quantities individual consumers would purchase at each possible price.
c. obtained by adding the marginal benefit obtained by each consumer at each possible quantity.
d. the marginal cost curve for the pure public good.
5. The efficient output of a pure public good is achieved at the point at which:
a. the marginal benefit obtained by each consumer equals the marginal social cost of producing the good.
b. the sum of the marginal benefits of all consumers equals the marginal social cost of producing the good.
c. the marginal benefit of each consumer equals zero.
d. the marginal social cost of producing the good is zero.
e. both (c) and (d)

6. The monthly rental rate for a satellite dish antenna is $200. The maximum marginal benefit that any resident of a condominium community will obtain per month from the antenna is $50. There are 100 residents in the community, none of whom values the antenna at less than $25 per month. Assuming that the antenna is a pure public good for residents of the community,
a. each resident of the community will rent his own antenna.
b. it is inefficient for the community to rent an antenna.
c. it is efficient for the members of the community to rent an antenna for their common use.
d. it is efficient for each resident to rent his own antenna.
7. In a Lindahl equilibrium,
a. each consumer purchases a pure public good up to the point at which his or her marginal bene¬fit equals the marginal social cost of the good.
b. each person pays a tax per unit of the pure public good equal to his or her marginal benefit.
c. the sum of the marginal benefits of all consumers equals the marginal social cost of the good.
d. both (a) and (c)
e. both (b) and (c)
8. The free-rider problem:
a. becomes more serious as the number of persons involved in voluntarily financing a pure public good decreases.
b. becomes more serious as the number of persons involved in voluntarily financing a pure public good increases.
c. is independent of the number of persons involved in a scheme to voluntarily finance a pure public good.
d. does not prevent voluntary cooperation from efficiently providing pure public goods.
9. The marginal cost of making a given quantity of a congestible public good available to more con¬sumers is:
a. always zero.
b. positive and increasing.
c. positive and decreasing.
d. zero at first but eventually becomes positive and increasing.
10. Cable TV programming is an example of a:
a. congestible public good.
b. price-excludable public good.
c. pure public good.
d. pure private good.
11. A major distinction between pure public goods and pure private goods is that:
a. pure private goods can easily be priced and sold in markets.
b. pure public goods can easily be divided into units.
c. pure public goods can only be collectively consumed.
d. both (a) and (c)
12. The principle of nonexclusion for pure public goods means that the benefits of the good:
a. are shared.
b. can be priced.
c. cannot be withheld from consumers even if they refuse to pay.
d. are not reduced to any one consumer when a given quantity is consumed by another.
13. Which of the following is true in a Lindahl equilibrium for cooperative supply of a pure public good?
a. The sum of the tax shares per unit paid by each consumer is equal to the marginal social cost of the public good.
b. The sum of the tax shares per unit paid by each consumer is equal to the marginal social benefit of the good.
c. The sum of the tax shares per unit paid by each consumer is maximized.
d. both (a) and (b)
14. Which of the following is a good example of a congestible public good?
a. TV programming
b. a road
c. a loaf of bread
d. homeland security
15. Education is:
a. a pure public good.
b. a pure private good.
c. a good that has characteristics of both public goods and private goods.
d. not subject to the exclusion principle.
16. An example of an undesirable public good (or public “bad”) is:
a. government.
b. private trash hauling.
c. poor air quality.
d. private property.
17. Public transportation is:
a. a congestible good.
b. a pure private good.
c. a good without limits to the number of consumers who desire to use it.
d. not subject to the exclusion principle.
18. A baseball field is:
a. a pure public good.
b. a pure private good.
c. a good that has characteristics of both public goods and private goods.
d. not subject to the exclusion principle.
19. A means of creating a price-excludable public good is:
a. allowing food and beverages when entering.
b. requiring costly tickets.
c. to fund through taxation.
d. requiring identification.
20. A free concert in a public arena is:
a. a non-congestible public good.
b. a good that can be consumed by all.
c. a private good.
d. subject to consumption limits.

CHAPTER 5
Public Choice and the
Political Process
TRUE/FALSE QUESTIONS
1. A political equilibrium for a pure public good is generally independent of the collective choice rule used.
2. A voter’s most-preferred political outcome will change if, other things being equal, that person’s tax share per unit of the public good is changed.
3. A proposal is put forward to increase the number of police officers. You estimate that your mar¬ginal benefit from police protection just equals your tax per police officer at the number of officers that would constitute the police force if the proposal passes. You will therefore vote in favor of the proposal.
4. If all voters have the identical most-preferred political outcome, given their tax shares, then the political equilibrium under majority rule will be identical to the political equilibrium under unani¬mous consent.
5. The median voter is the one whose most-preferred political outcome is the median of the most-preferred outcome of all those voting.
6. If all voters have single-peaked preferences, a political equilibrium will not be possible under majority rule.
7. A person with multiple-peaked preferences is always made worse off as the quantity of a pure public good is increased, or decreased, once he or she attains his or her most-preferred political outcome.
8. Logrolling always succeeds in passing two paired issues that could not pass if voted on separately.
9. A bureaucrat who seeks to maximize the annual size of his budget each year will propose annual output levels corresponding to the amount for which MSB = MSC.
10. Political transactions costs are likely to be greater under unanimous consent than under majority rule.
11. Political externalities are likely to be negligible when collective choices are made under majority rule.
12. Unanimous consent is a collective choice rule that will protect the rights of minorities.
13. A person for whom the marginal benefit of a public good declines as more is made available has single-peaked preferences.
14. Cycling can occur in elections under majority rule if some voters have multiple-peaked prefer¬ences.
15. Special interest groups are more likely to gain income through the political process if they are a large percentage of the population.
16. A ration person’s most preferred political outcome is when the cost of the quantity of government-supplied goods is below the marginal benefit.
17. A budget-maximizing bureaucrat seeks funding levels where the total social cost equals the total social benefit.
18. Logrolling can allow more than one issue of minority interest to be passed.
MULTIPLE CHOICE QUESTIONS
1. A community currently hires 10 security guards per week to patrol their neighborhood. Each secu¬rity guard costs $300 per week. Assuming that the tax-sharing arrangement agreed to results in each of 300 voters paying the same tax share, each voter pays a weekly tax bill of:
a. $1.
b. $3.
c. $10.
d. $30.
2. A small community currently taxes residents to provide monthly community concerts. Voter A currently pays a tax per concert equal to $50 per month. This voter receives a marginal benefit of $75 at the current political equilibrium number of concerts per month. Voter A:
a. is the median voter.
b. would be made better off if the number of monthly concerts were increased.
c. would be made worse off if the number of monthly concerts were increased.
d. has achieved his most-preferred political outcome for monthly concerts.
3. A proposal to build new roads in a small town is up for a vote. Voter B estimates that his marginal benefit of roads at the proposed new level would be $80 per year. This voter will vote against the proposal:
a. no matter what her tax share.
b. if her tax share is $80.
c. if her tax share is less than $80.
d. if her tax share exceeds $80.
4. Currently eight security guards patrol a condominium community each week. The number of guards has been determined by majority rule. Each voter pays a tax share of $50 per guard. If Voter M is the median voter,
a. his marginal benefit from security guards is $50.
b. his marginal benefit exceeds that of any other voter.
c. the difference between his marginal benefit and $50 is at a maximum.
d. he would be made better off if more security guards were hired per week.
5. If all voters have single-peaked preferences, then under majority rule:
a. cycling of political outcomes can occur.
b. a political equilibrium exists.
c. the political equilibrium is the median most-preferred outcome.
d. both (b) and (c)
6. If a person has multiple-peaked preferences for a pure public good,
a. that person is always made worse off when moving away from his or her most-preferred polit¬ical outcome.
b. that person will become worse off at first, but then become better off, when moving away from his or her most-preferred political equilibrium.
c. the marginal benefit of the pure public good always declines for that person as more is made available.
d. both (b) and (c)
7. Implicit logrolling results when:
a. any two issues are paired on a ballot.
b. two voters succeed in pairing two issues on a ballot that can pass together but would fail indi¬vidually.
c. voters agree to trade votes on an issue.
d. the pairing of two issues on a ballot allows the achievement of efficiency.
8. Voter A will normally vote in favor of one security guard per week because his marginal benefit is $125 and his tax share is $100 per week. Voter A receives zero marginal benefit from one concert a week and would vote against it. Voter B receives $125 marginal benefit from one concert per week but no marginal benefit from one security guard. One concert per week also will fail to gain a majority when put to the vote. Assuming that both Voter A and Voter B will pay $100 per week in tax for each concert and each security guard,
a. they can both gain by engaging in logrolling on the two issues.
b. pairing the issues on one ballot will result in both Voter A and Voter B voting in favor of the combined issue.
c. pairing the issues on one ballot will result in both Voter A and Voter B voting against the com¬bined issue.
d. implicit logrolling will result in Voter A voting in favor of the combined issue, but in Voter B voting against it.
9. A voter may choose not to vote in an election between two alternatives because:
a. he or she is indifferent between the two alternatives.
b. his or her probability of influencing the result is zero.
c. his or her most-preferred alternative is far from the two offered on the ballot.
d. all of the above
10. If bureaucrats seek to maximize the size of their budgets, they will:
a. seek to fund levels of services up to the point at which MSC = MSB.
b. seek to fund levels of services for which TSB > TSC.
c. seek to fund levels of services for which MSC > MSB.
d. both (b) and (c)
11. The demand curve for a pure public good is:
a. obtained by adding the quantity demanded at each possible price for all consumers.
b. obtained by summing the marginal benefits of each consumer for each possible quantity.
c. always upward sloping.
d. always a flat line.
12. A voter’s most-preferred political outcome will be that for which the:
a. marginal benefit of a pure public good is equal to the voter’s tax share per unit.
b. total benefit per unit of a pure public good is equal to the voter’s tax share per unit.
c. difference between the marginal benefit of a pure public good and the voter’s tax share per unit is maximized.
d. marginal benefit of a pure public good is equal to zero, no matter what the voter’s tax share per unit.
13. If all voters have single-peaked preferences for a pure public good, then the political equilibrium under majority rule:
a. cannot be defined.
b. is the median outcome.
c. is the median most-preferred outcome of all voter’s voting.
d. will not change if tax shares change.
14. Which of the following collective choice rules is likely to have the lowest political externalities?
a. two-thirds majority rule
b. simple majority rule
c. plurality rule
d. unanimous consent
15. Which of the following collective choice rules is likely to incur the highest political transactions costs?
a. two-thirds majority rule
b. simple majority rule
c. plurality rule
d. unanimous consent
16. If the marginal social benefit of one more unit of a good is 10 and the marginal social cost of one more unit of a good is 11, then:
a. the output of the good is efficient.
b. a bureaucrat can still increase the bureau’s budget.
c. a bureaucrat can increase the bureau’s budget if the total social cost exceeds the total social benefit.
d. a bureaucrat can increase the bureau’s budget if the total social cost is below the total social benefit.
17. The plurality rule is:
a. a collective bargaining rule.
b. a rule that is guaranteed to have majority decision.
c. a means of determining between only two possible outcomes.
d. a rule that cannot lead to a minority decision.
18. Arrow’s impossibility theorem states:
a. a unique political equilibrium for a public choice never exists.
b. a unique political equilibrium for a public choice cannot exist under majority rule.
c. a unique political equilibrium can exist if there is majority rule and multi-peaked preferences.
d. a unique political equilibrium for a public good cannot exist under unanimous consent.
19. Suppose tax shares are evenly distributed for a particular service at the amount of $100.00 per person. Which taxpayer suffers a political externality based on the taxpayer’s marginal benefit for the service?
a. Taxpayer A has a marginal benefit of $100.00.
b. Taxpayer B has a marginal benefit of $200.00.
c. Taxpayer C has a marginal benefit of $90.00.
d. Taxpayers B and C.
20. A public choice is:
a. free of any political interaction or process.
b. by majority rule only.
c. one made through political interaction of many people according to established rules.
d. by unanimous consent only.