5. The Hicks-Kaldor Compensation Principle states that a policy produces a net gain if a it makes at least one individual better off without making another worse off. b the losers of the policy could, in principle, compensate the gainers and still be better off. c government revenue losses from the project are compensated for by social gains. d none of the above 6. According to the Tiebout hypothesis, a the social marginal benefit of an activity should equal its social marginal cost. b the provision of local government services is riddled by problems of preference aggregation. c negative spillovers between jurisdiction can be eliminated when property rights are well- defined and bargaining is costless d local taxes reflect the benefit of local government services. 7 . Which of the following does not receive preferential tax treatment in the federal income tax code a Food b Donations to religious and non-religious charities c Health care d Owner-occupied housing 8. Which of the following type of government spending appears to currently face the largest fiscal imbalance in the future? a Health b Education c Defense d Income Maintenance 3