1 Which of the following could lead to an externality? ANSWER CHOICES: A) Increased competition B) Regulation of production or consumption C) Minimal or zero transaction costs D) Perfectly symmetric information E) Unclear property rights Question 2 Consider a situation in which there is overproduction, as in the case of pollution, or underproduction, as in the case of vaccinations. What type of policy should a government enact to produce the socially optimal quantity in the most economically efficient way? ANSWER CHOICES: A) Private provision B) Per-unit taxes and subsidies C) Environmental deregulation D) Strict enforcement of property rights E) Ensure property rights are not transferable Question 3 Which of the following scenarios best exemplifies a non-excludable and rivalrous good? ANSWER CHOICES: A) A river in a state where people can fish B) A wireless internet service without a password C) A public radio broadcast D) An online newspaper requiring a subscription E) A pair of shoes made by a popular name brand Question 4 Which of the following scenarios best exemplifies a non-excludable and rivalrous good? ANSWER CHOICES: A) A river in a state where people can fish B) A wireless internet service without a password C) A public radio broadcast D) An online newspaper requiring a subscription E) A pair of shoes made by a popular name brand Question 5 A per-unit tax on a good with relatively inelastic demand will result in ANSWER CHOICES: A) less tax revenue than if demand were elastic B) a lower tax burden on consumers than on producers C) more deadweight loss than if demand were elastic D) a higher tax burden on consumers than on producers E) a tax burden that is equally distributed between consumers and producers Question 6 What is the most direct effect of a lump-sum production subsidy? ANSWER CHOICES: A) It increases market competition. B) It corrects a positive externality. C) It corrects a negative externality. D) It encourages production of private goods. E) It increases profit without affecting output. Question 7 If Country S has greater income inequality than Country T, which of the following must be true? ANSWER CHOICES: A) Country S will have greater wealth overall. B) Country T will have greater wealth overall. C) Country S will have a higher Gini coefficient than Country T. D) Country S will have a lower Gini coefficient than Country T. E) Country S will have more people in poverty than Country T. Question 8 Which of the following is a reason for increased income inequality? ANSWER CHOICES: A) There is a decrease in the productive capacity of capital so that wages and salaries are instead paid to an improving labor force. B) Taxes on earnings are collected each year, and the amount per worker is based on a progressive calculation. C) Market wages are rising, and so the unemployed are incentivized to find a job. D) People in a society do not begin with the same human capital, social capital, or bargaining power. E) The structure of the labor union is reorganized such that their bargaining power is increased significantly