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The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government gives a voucher equal to $3,000 per year to each college student, how many students will be accepted? A) 8 million per year B) 12 million per year C) 10 million per year D) 14 million per year The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government gives a voucher equal to $3,000 per year to each college student, how many students will be accepted?


A) 8 million per year
B) 12 million per year
C) 10 million per year
D) 14 million per year

E) All of the above
F) A) and B)

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Explain why some amount of ignorance can be rational.

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Acquiring information is not costless. T...

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The fact that you may not know who your congressional representative is represents


A) rational ignorance on your part.
B) the rival nature of information.
C) inefficient oversupply of public servants.
D) the use of the median voter theorem.

E) B) and C)
F) All of the above

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Suppose that recycling rubber for sneakers creates an external benefit of $2.00 per ton of rubber. There are no external costs. The efficient amount of rubber will be recycled when the government creates a


A) subsidy of more than $2.00 per ton of rubber.
B) subsidy of $2.00 per ton of rubber.
C) tax of more than $2.00 per ton of rubber.
D) tax of $2.00 per ton of rubber.

E) A) and B)
F) All of the above

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Every year as the clock nears midnight on December 31st, the eyes of the world turn to Times Square in New York City to watch the famous ball drop at midnight. The event is open to everyone, but it is advised you arrive early to participate because the square quickly becomes crowded with no space left for latecomers. This celebration can be classified as


A) rival and excludable.
B) non-rival and non-excludable.
C) non-rival and excludable.
D) rival and non-excludable.

E) None of the above
F) A) and B)

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Which of the following methods is used by the government to ensure that an efficient level of college education is achieved? I. Below-cost provision II) Allowing everyone to free ride


A) I only
B) II only
C) both I and II
D) neither I nor II

E) A) and B)
F) All of the above

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Rational ignorance means


A) ignorance is rationed.
B) the benefit from some information is not worth the cost of collecting it.
C) some people do not understand rationality.
D) the information is unavailable.

E) All of the above
F) C) and D)

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-Ten homeowners live around Lake Alice. Unfortunately, the lake is contaminated with various chemicals and the level of contamination is currently 20 parts per million. All the homeowners benefit equally if the level of contamination is reduced. The table above gives the marginal social cost and marginal social benefit for removing the contaminants from the lake. Cleaning the lake is a public good. a) What will be the parts per million if the homeowners alone are in charge of reducing the contaminants? b) What is the efficient amount of contamination? -Ten homeowners live around Lake Alice. Unfortunately, the lake is contaminated with various chemicals and the level of contamination is currently 20 parts per million. All the homeowners benefit equally if the level of contamination is reduced. The table above gives the marginal social cost and marginal social benefit for removing the contaminants from the lake. Cleaning the lake is a public good. a) What will be the parts per million if the homeowners alone are in charge of reducing the contaminants? b) What is the efficient amount of contamination?

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a) Homeowners will not reduce the contam...

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An externality occurs when


A) the costs of producing a good are paid entirely by the producer.
B) some of the costs of producing a good are paid by someone other than the producer.
C) the marginal social cost of an activity increases as that activity is increased.
D) Both answers A and C are correct.

E) B) and D)
F) B) and C)

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The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government provides the efficient amount of education, how many students will be accepted? A) 8 million per year B) 12 million per year C) 10 million per year D) 16 million per year The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, if the government provides the efficient amount of education, how many students will be accepted?


A) 8 million per year
B) 12 million per year
C) 10 million per year
D) 16 million per year

E) A) and B)
F) None of the above

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-In the above table, the efficient level of output is A) 2,000 units. B) 3,000 units. C) 4,000 units. D) 5,000 units. -In the above table, the efficient level of output is


A) 2,000 units.
B) 3,000 units.
C) 4,000 units.
D) 5,000 units.

E) All of the above
F) None of the above

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An example of a good that is both rival and excludable is


A) the defense services provided by a new stealth bomber.
B) a pair of pants.
C) a beautiful sunset.
D) an uncrowded theme park such as Walt Disney World.

E) B) and C)
F) All of the above

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A public choice is


A) a decision that affects one person.
B) a decision that affects no one.
C) a decision made in public.
D) a decision that affects an entire society.

E) A) and B)
F) B) and C)

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Because of voter rational ignorance, the government might not produce the efficient quantity of a public good.

A) True
B) False

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-The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is A) zero. B) $4,000. C) $5,000. D) $7,000. -The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is


A) zero.
B) $4,000.
C) $5,000.
D) $7,000.

E) None of the above
F) B) and C)

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-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition? A) $4,000 B) $8,000 C) $12,000 D) $16,000 -The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition?


A) $4,000
B) $8,000
C) $12,000
D) $16,000

E) B) and C)
F) All of the above

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If the marginal social benefit of a city's sewage system is less than the marginal social cost, then the city will achieve an efficient use of resources if it ________.


A) decreases the capacity of the sewage system
B) does not change the capacity of the sewage system
C) increases the capacity of the sewage system
D) increases the sewerage charge that the residents pay

E) A) and B)
F) All of the above

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-Broomfield city council is deciding how many police officers the city needs. Broomfield's population is 10,000 people. The marginal cost of a police officer is $60,000 per year. The marginal benefit schedule of an average city resident from police protection is shown in the table above. Police protection is a public good. If voters in Broomfield are well informed and know what is best for them, the political equilibrium is that ________ police officers will be hired. A) 2 B) 4 C) 6 D) 3 -Broomfield city council is deciding how many police officers the city needs. Broomfield's population is 10,000 people. The marginal cost of a police officer is $60,000 per year. The marginal benefit schedule of an average city resident from police protection is shown in the table above. Police protection is a public good. If voters in Broomfield are well informed and know what is best for them, the political equilibrium is that ________ police officers will be hired.


A) 2
B) 4
C) 6
D) 3

E) C) and D)
F) B) and C)

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-In the above figure, to achieve efficiency, the government should A) impose a tax of $2 per unit. B) impose a tax of $3 per unit. C) offer a subsidy of $2 per unit. D) offer a subsidy of $3 per unit. -In the above figure, to achieve efficiency, the government should


A) impose a tax of $2 per unit.
B) impose a tax of $3 per unit.
C) offer a subsidy of $2 per unit.
D) offer a subsidy of $3 per unit.

E) None of the above
F) A) and B)

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-The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What is the marginal social benefit from education? A) It depends on the demand. B) $20,000 C) $10,000 D) $40,000 -The marginal cost of educating a student is $30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education. An independent government agency determines that the efficient number of students is 40,000. What is the marginal social benefit from education?


A) It depends on the demand.
B) $20,000
C) $10,000
D) $40,000

E) A) and D)
F) A) and C)

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