Which of the following statements about the social welfare function is not true? a. It can be thought of as a set of indifference curves that depict the wealth of the entire society. b. It does not employ interpersonal utility comparisons. c. It is one possible method for evaluating the public interest/ d. It allows […]
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
The fact that government has a monopoly on force _____. a. means that government can protect individual rights but is strong enough to violate them b. means that government can protect individuals rights yet is strong enough not to violate them c. means that individuals have secure and well-defined property rights d. means that individuals […]
Which of these is an argument for using the potential compensation criterion? a. If the winners can compensate the losers, no one is harmed by employing the criterion. b. The criterion does not employ interpersonal utility calculations. c. If employed over a large number of policy changes, everyone should enjoy a net gain in the […]
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
