Government regulators know that pollution is a problem in Cleveland. However, information on the social cost of this externality is difficult to come by. Which of the following statements best describes how this information problem might manifest itself? a. Well-intentioned regulators monitor a handful of polluting factors and are unable to determine how much they […]
If compared against other criteria for evaluating the public interest, the social welfare function is most comparable to _____. a. utilitarianism b. the Pareto criteria c. the potential compensation criterion d. cost-benefit analysis ANSWER a
Positive economic analysis _____. a. evaluates policy changes and determines whether it is a good idea b. seeks to understand the outcome of a policy change c. cannot be proven incorrect d. is a statement about “what ought to be” ANSWER b
The capture theory of regulation states that _____. a. regulators act in the best interests of regulators b. regulators act in the best interests of politicians c. regulators act in the best interests of the general public d. regulators act in the best interests of the regulated ANSWER d
Normative economic analysis _____. a. is concerned only with the facts b. is a statement about the relationship between a policy change an outcome c. judges the desirability of a policy change d. does not involve value judgments ANSWER c
In his classic treatise on public finance, Richard Musgrave says the economic activities of the state can be broken down into _____. a. allocation, distribution, production b. allocation, distribution, stabilization c. allocation, production, protection d. production, protection, allocation ANSWER b
Which of the following is not a limitation of the Pareto criteria? a. Almost any policy change will make at least one person worse off. b. The status quo is lent legitimacy from being the starting point for evaluating social welfare. c. The criteria cannot tell us if a particular policy change will make all […]
If the Pareto criteria are taken literally, _____ percent of United States residents must agree for a policy change to be a move towards efficiency. a. 25 b. 50 c. 75 d. 100 ANSWER d
The government protects rights in a market economy by providing _____. a. production b. allocation c. registration d. courts ANSWER d
The optimal level of rights protection is _____. a. zero b. the marginal cost of additional protection equals the market price of the good c. the marginal cost of additional protection equals the marginal benefit of the good d. absolute ANSWER c
