Question

The welfare loss from monopoly can be seen from the difference in equilibrium between

	a.	marginal revenue and marginal benefit.
	b.	marginal cost and marginal benefit.
	c.	supply and demand.

Which of the following is not a reasonable argument for government involvement in education?

	a.	Education has some public good aspects, especially in a democracy.
	b.	Education is a merit good.
	c.	Education is more efficiently produced by government.
	d.	Public provision of education has desirable distributional consequences.

A mixed economy is one in which

		both labor and capital contribute significantly to production
		both industrial and service sectors are important
		a centralized government controls economic activity and produces some military goods and some consumer goods.
		both government and private firms play important economic roles.

Question 4

The number of local governmental entities in the United States is roughly

	a.	850
	b.	8500
	c.	850,000
	d.	85,00

Question 5

Which of the following questions is much more important in public economics than in other areas of economics?

	a.	What should be produced?
	b.	How should decisions be made?
	c.	How should goods be produced?
	d.	To whom are goods distributed?

Question 6

The invisible hand refers to

	a.	the coordination of activities through prices in a decentralized competitive economy
	b.	the safety net ready to catch people who fall under the poverty line.
	c.	government intrusion in private affairs.
	d.	the link between the “fingers” of government: federal, state, and local.

Governments should prefer programs that do not change consumers’ marginal incentives if they are

	a.	interested in the consumption of merit goods.
	b.	interested in exploiting substitution effects.
	c.	interested in the utility of the consumer.
	d.	primarily concerned with questions of equity.

Question 8

The notion of civic responsibility is important in understanding

	a.	the preferences of the median voter.
	b.	the demand for most public goods.
	c.	why voters bother to vote.
	d.	the distribution of tax prices.

Question 9

Which is not true of utilitarianism?

	a.	It was espoused by Jeremy Bentham.
	b.	It implies that a dollar given to one person is as important as a dollar given to anyone else.
	c.	It implies linear social indifference curves.
	d.	It encourages redistribution when there is diminishing marginal utility of income.

Sunk costs are

	a.	all expenditures already made or promised.
	b.	avoidable by natural monopolies.
	c.	not recoverable through exit..
	d.	losses necessary in order to overcome barriers to entry.

Answer 1

Q1. Option c
Reason:- Welfare loss is the loss of welfare which is caused due to the over production or reduced production or consumption in an economy. Hence, due to the over or reduced production or consumption, there will be difference between the supply and demand of products. This difference is considered as the welfare loss.

Q2. Option d
Reason:- public provision of education would cause an effective distribution of provisions in the economy thereby maximizing welfare of the economy.

Q3. Option d
Reason:- Mixed economy is an economy, in which both the government and private firms play an important role in the economy.

Q4. Option b
The number of local government entities in the United States is roughly 8500.