1. Which of the following reasons are not good justifications for government intervention?

1. Market Failure due to the presence of externality, public goods, or asymmetric information.
2. The market does not deliver a fair allocation.
3. Government can help protect the market.
4. Prices are not too high or too low.
5. There are frictions in the market resulting in inefficiency and the government should intervene to remove the frictions.
6. The government can make a better choice for individuals because it has more information about the economy, including others preference, technology, and resource constraints.

2. Pareto efficient allocation requires?

1. All individuals have the same marginal benefit of consuming goods.
2. For inner allocations of inputs, all firms have the same marginal productivity of a given input.
3. For inner allocations of consumption goods, all firms have the same cost of producing goods.
4. The only way to make one person better off is to make some other persons worse off.
5. The sum of individuals utility is maximized

3. Which of the following does NOT reduce the problem of underprovision of public goods in the market?

1. Government tax all individuals to provide the goods and crowding-out is not complete.
2. Make donation for public goods be honorable.
3. Emphasize the importance of the public goods on poor families to attract altruistic donations.
4. Technology or law to charge fees for the private sector that provides public goods
5. Simply gives the property right to the individual provide the goods.

4. What kinds of predictions we can derive from the Tiebout model?

1. Other things equal, people will move to the place with better public goods or lower tax rate.
2. More choices of local communities, more satisfaction and more similarity within the communities.
3. Income redistribution will be unsuccessful.
4. Differences in regional attractiveness or peoples preference on the region will be capitalized into house prices.
5. Fiscal redistribution (equalization) across regions is not desirable as nobody wants it.