Question 1

Netflix could be considered an impure public good sometimes because:

Group of answer choices

1. it is both rival and excludable
2. we do not have enough information to answer this question
3. it is always rival in consumption
4. it is easily excludable

Question 2

Because of the free-rider problem in the provision of public goods, the private market/sector typically ends up _________________.

Group of answer choices

1. producing whatever consumers want.
2. producing just the right amount of the good
3. producing an exorbitantly high quantity of the good
4. producing an inefficiently low quantity of the good

Question 3

Which of the following problems,if overcome or reduced, could potentially allow the private market to produce the efficient quantity of the public good?

Group of answer choices

1. all of these
2. the problem of assignment
3. the problem of non-excludability of the good
4. transaction costs and negotiating problems.

Question 4

In public goods theory, which of these symbolizes the "preference aggregation" problem?

Group of answer choices

1. The challenge of the government in trying to combine the preferences of a large number of residents
2. The challenge of people not being able to combine their own preferences for goods and services
3. The challenge of people not wanting to reveal their true valuation of a public good
4. The challenge of people not knowing how much they value a public good

Question 5

Suppose a private business owner wants to convince the nearby businesses to keep the streets clean to make the area more attractive to prospective consumers. The problem that is likely to make this plan fail is called the:

Group of answer choices

1. free rider problem
2. crowding out problem
3. holdout problem
4. assignment problem

Question 6

In order to solve the free rider problem, the private sector often chargesuser feesfor the consumption of public goods which are:

Group of answer choices

1. higher in price than the valuation of the public good by the consumer
2. proportional to the valuation of the public good by the consumer
3. equal for every single consumer of the public good
4. lower in price than the valuation of the public good by the consumer

Question 7

The problem where consumers do not wish to express their true valuations for a public good, out of the concern that they might be charged more for it is called:

Group of answer choices

1. free rider problem
2. preference revelation problem
3. preference aggregation problem
4. preference knowledge problem

Question 8

An approach through which the government retains responsibility for providing a good or service but hires private sector firms to actually provide the good or service is called:

Group of answer choices

1. Business improvement district
2. Public provision
3. Altruism
4. Contracting out

Question 9

What is the method which is used to determine the market or the social demand curve in aprivate goods market?

Group of answer choices

1. Individual Summation
2. Vertical Summation
3. Horizontal Summation
4. Equal Summation

Question 10

Which activity is most consistent with altruism?

Group of answer choices

1. taxing individuals to pay for a new highway
2. buying more of a good as its price rises, all things equal
3. volunteering at the local homeless shelter in the community
4. taxing businesses to pay for a new highway

Question 11

Which of the following is true when there isoptimal provision of a public good?

Group of answer choices

1. the sum of all consumers' marginal rates of substitution equals marginal cost
2. each consumer's surplus equals marginal cost
3. marginal cost equals marginal rate of substitution for each consumer
4. total consumer surplus equals marginal cost

Question 12

When there is asymmetric information between sellers and buyers of insurance, that results in:

Group of answer choices

1. risk aversion.
2. zero deadweight loss
3. higher demand for insurance
4. adverse selection.

Question 13

In insurance theory, when individuals of all risk types buy insurance even though it is not priced fairly for all, this is known as a __________ equilibrium.

Group of answer choices

1. equal
2. social
3. separating
4. pooling

Question 14

If the government creates a rule that every individual has to purchase auto insurance because those without insurance cost other drivers money through rising premiums, which justification for government intervention is being used?

Group of answer choices

1. paternalism
2. redistribution
3. negative externalities
4. positive externalities

Question 15

In the used cars market, ____________ are much more likely to know about the potential defects in the cars than the __________.

Group of answer choices

1. bureaucrats; sellers
2. sellers; buyers
3. buyers; sellers

Question 16

In the insurance market, _________ know more about their insurable risks than the ________________.

Group of answer choices

1. buyers; sellers
2. bureaucrats; buyers
3. sellers; buyers

Question 17

Which statement is always TRUE whenever a good is taxed?

Group of answer choices

1. The price is reduced by the amount of the tax.
2. The new equilibrium quantity is higher than the optimal amount.
3. There is a deadweight loss.
4. Firms produce more than the optimal amount of the good.

Question 18

All other things equal, producers bear more of a tax as demand becomes more __________.

Group of answer choices

1. inelastic
2. elastic
3. negative
4. neutral

Question 19

A tax levied on producers is fully shifted to consumers when demand is perfectly elastic.

Group of answer choices

1. True
2. False

Question 20

All other things equal, the deadweight loss of a tax on producers is higher when demand is __________.

Group of answer choices

1. inelastic
2. elastic
3. perfectly inelastic
4. neutral

Question 21

Which statement related to elasticity and tax incidence is NOT true?

Group of answer choices

1. For products with an elastic demand, the burden of the tax is borne almost entirely by the producers.
2. Parties with elastic demand or supply bear taxes; parties with inelastic demand or supply avoid them.
3. For products with an inelastic demand, the burden of the tax is borne almost entirely by the consumer.

Question 22

The principle that groups with more resources should pay higher taxes than groups with fewer resources is known as horizontal equity.

Group of answer choices

1. True
2. False

Question 23

One of the rules of tax incidence says that the "side" of the market on which the tax is imposed also determines the distribution of the tax burdens.

Group of answer choices

1. True
2. False

Question 24

It is much harder for consumers to avoid consumption and thus the taxation on consumption when demand is more inelastic.

Group of answer choices

1. True
2. False

Question 25

Workers in a firm have access to workers' compensation, and the firm as a result isn't as careful about safeguarding the workers against workplace accidents. This is an example of _______________.

Group of answer choices

1. social insurance
2. moral hazard
3. adverse selection

Question 26

Tax systems in which the effective average tax rates do not change with income, so that all taxpayers pay the same proportion of their income in taxes are known as _____________ tax systems

1. regressive
2. proportional
3. progressive

Question 27

When it comes to a social insurance program like Workers' Compensation, if an employer could truly or fully observe whether or not a worker has been injured on the job, then the moral hazard problem associated with the program could be greatly reduced.

1. True
2. False

Question 28

When facing an adverse event like unemployment, some people can self-insurance against such events. Which of the following is NOT a means of self-insurance against unemployment or job loss?

1. borrowing from your parents
2. receiving government-provided unemployment insurance
3. borrowing against the equity you might have on your home
4. using the savings in your emergency fund

Question 29

It is __________ for people to self insure against a(n) __________ event, such as increasing their savings for eventual retirement.

1. harder; predictable
2. easier; unpredictable
3. easier; predictable

Question 30

The existence of __________ shown by individuals means that sometimes it may not be optimal for the government to provide the full insurance that is demanded by risk averse consumers.

1. rationality
2. utility maximization
3. moral hazard behavior

4. risk aversion

Question 31

If someone starts driving erratically after lowering the deductible on their car insurance, then that could be:

1. moral hazard
2. utility maximization
3. adverse selection
4. inefficiency

Question 32

The central trade off of social insurance implies that by ______________ in private insurance markets, the government could potentially ___________ the underlying behavioral problemsthat come with having access to insurance.

1. fixing the failures; also solve
2. increasing the failures; eradicate
3. fixing the failures; worsen
4. increasing the failures; hold constant

Question 33

Moral hazard stemming from insurance coverage is costly because it lowers the __________________ in an economy.

1. social efficiency
2. government intervention
3. crowding out
4. government debt

Question 34

The formula forconsumer tax burden= (post-tax price pre-tax price) + per-unit tax payments by _________________.

1. producers
2. the government
3. consumers

Question 35

When an insurance company tries to charge different prices to different consumers for the insurance product, but does not know the true risk type of each consumer, theoretically this will lead to a situation where the company will end up _______________.

1. incurring losses
2. earnings lots of profits
3. breaking even each year

Question 36

The deadweight loss of a given tax islargerwhen the demand curve isless elastic(or more inelastic) than when it is more elastic.

1. True
2. False

Question 37

When it is neither easy nor very attractive to change our behavior in order to qualify for any insurance, then the incidence of moral hazard will be much lower.

1. True
2. False

Question 38

The difference in the level of information that is available to sellers and to purchasers in a market is known as:

1. Full information
2. Partial information gap
3. Information asymmetry

Question 39

Diminishing marginal utility translatesto the statement that always having two slices of pizza is better than sometimes having four and sometimes having zero.

1. True
2. False

Question 40

Asymmetric information between buyers and sellers in a market can never lead to market failures.

1.True

2.False

Instructions for your tutor:

Please take your time and answer all questions.