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
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
Which of the following are reasons to consider the protective role of the state in an economic framework? a. The protection of rights is necessary for a functioning economy. b. The protection of rights comprises a large portion of the government spending. c. The protection of rights is necessary for international trade. d. Both a […]
Pareto optimality and Pareto superiority _____. a. concern only monetary gains and losses b. compare utility gains with utility losses c. do not require interpersonal utility comparisons d. are equivalent to the concept of economic efficiency ANSWER c
If the utility function (U) between food (F) and clothing (C) can be represented as U = , the marginal rate of substitution of clothing for food equals A) -C/F. B) -F/C. C) – . D) – . ANSWER A
Market exchange assumes that _____. a. there are no monopolies b. prisoner dilemmas are nonexistent c. parties to the exchange have well-defined property rights d. the public sector is failing its job ANSWER c
