Question 2 Madam Yayra has a grape yard in which she keeps beehives. The nectar from the flowers is used by bees to produce honey. ELISON, a honey processing company depends so much on the produce from this orchard. Describe the externality generated by Madam Yayra. How would this externality be corrected by government? (Hint: diagram required). (10 marks)4) If the government budget deficit stays the same and GOP falls, then A) the ratio of the deficit to GDP stays the same 8) the ratio of the deficit to GDP decreases C) the ratio of the deficit to GDP increases D) without more information, it is impossible to determine. The willly possibility curve below shows the trade-off between improvement in efficiency and changes in the distribution of welfare. Annual well being of 'A Annual well being of 'n' Use the information to answer the questions 5 and 6 3) A government policy that will move individual 'A" from en to e, will improve............. Al efficiency of B B) welfare of A () welfare of D D) efficiency of A "j A move to re-position y at of indicates..... .. ... A) Pareio improvement B) Parcto optimality C) Enhancement in wellbeing of only A DJ Enhancement in wellbeing of both A and B 7) A pure public good is.. .... mmm. A) Rival in consumption and subject to exclusion. B) Rival in consumption and not subject to exclusion. () Non-rival in consumption and subject to exclusion. Dy Non-rival in consumption and not subject to exclusion17) In project evaluation, independent projects ard. .. A) when only one project is accepted out of several that satisfy the criterion Bj when the feasibility can be assessed without consideration of other projects C) when its cash flows inversely have an impact on the acceptance of D) when the project is expected to add more value to the well-being of society in the long run 18) The efficient quantity of a pure public good occurs when the marginal cost of producing that pood equals the A) marginal benefit to each individual. B) sum of all individual marginal benefits. C) marginal benefit to all public sector participants D) sum of all individual marginal benefits divided by all public sector participants S 19) Adverse selection is a problem associated with equity and debt contracts arising from A) the lender's lack of information about the borrower's potential rewarns and risks of his Investment activities By the kender's inability to legally require sufficient collateral to cover a 100 percent loss if the borrower defaults C) the borrower's lack of incentive to seek a loan for highly risky investments. Dj the borrower's lack of information about the contract terms 20) A government program would impose a 25-cent tax on each pack of cigarettes in order to fund welfare programs, Such a policy A) is not a Pareto improvement Hj is economically inefficient C) would clearly not increase tax revenues DJ is a Pareto improvement