Micro 001

Q2The main reason that public goods must be provided by the government is

a. the free-rider.

b. negative externalities are part of the production process.

c. they are perfectly divisible.

d. public goods are merit goods.

Public goods are desired because

a. people want and value them but the private sector will not make them available.

b. we want the government to spend our tax dollars.

c. they make supply equal to demand for private goods.

d. they came in small units.

Private goods are goods

a. for which the more one person has the less is available for someone else.

b. that are produced by the government.

c. that carry a price.

d. for which price is greater than zero.

The major economic effect of Medicare subsidies is

a. to increase the price of medical services and reduce the quantity demanded.

b. to increase the price of medical services and increase the quantity demanded.

c. that the number of physicians has decreased since compensation is low.

d. to lower the price of medical services and reduce the quantity demanded.

Granting vouchers to parents of public school students which permits sending students to private school would:

a. Shift the demand for public school education to the right and the demand for private school education to the left.

b. Leave both demand curves unchanged.

c. Shift the demand for private school education to the right and that of public school education to the left.

d. Shift both the demand for private and public school education to the right.

In the spring I enjoy the fragrance coming from my neighbors trees. This is an example of

a. a negative externality.

b. the need for antitrust legislation.

c. a demerit good.

d. a free-rider.

The government might give a subsidy when

a. a negative externality exists.

b. it wants to increase the amount of a good consumed.

c. an effluent fee has been unsuccessful.

d. it wants to transform a negative externality into a positive externality.

Use (2.2.3) and (2.2.4) to obtain the mean and variance of the claim random variable X where q = 0.05 and the claim amount is fixed at 10. Obtain the mean and variance of the claim random variable X where q - 0.05 and the claim amount random variable B is uniformly distributed between 0 and 20. Let X be the number of heads observed in five tosses of a true coin. Then, X true dice are thrown. Let Y be the sum of the numbers showing on the dice. Determine the mean and variance of Y. [Hint: Apply (2.2.10) and (2.2.11).] Let X be the number showing when one true die is thrown. Let Y be the number of heads obtained when X true coins are then tossed. Calculate E[Y] and Var(Y). Let X be the number obtained when one true die is tossed. Let Y be the sum of the numbers obtained when X true dice are then thrown. Calculate E[Y] and Var(Y). The probability of a fire in a certain structure in a given time period is 0.02. If a fire occurs, the damage to the structure is uniformly distributed over the interval (0, a) where a is its total value. Calculate the mean and variance of fire damage to the structure within the time period. on 2.3 Independent random variables X, for four lives have the discrete probability functions given below. Pr(X] = x) Pr(X, = x) Pr(X, = x) Pr(X, = x) 0.6 0.7 0.6 0.9 0.0 0.2 0.0 0.0 0.3 0.1 0.0 0.0 0.0 0.0 0.4 0.0 0.1 0.0 0.0 0.1 Use a convolution process on the non-negative integer values of x to obtain Fs(x) for x = 0, 1, 2, . . . , 13 where S = X, + X2 + X3 + X4- Let X; for i = 1, 2, 3 be independent and identically distributed with the d.f. x