Question

#12) If everyone has the same cardinal utility function and if there is diminishing marginal utility of income, then all other things being equal other than income, a fine of $1000 will, in utility terms

1. Hurt a rich person more than a poor person.
2. Hurt a poor person more than a rich person.
3. Does equal harm to either a rich or a poor person since they both would lose           the same amount of income.
4. None of the above.

#13) For a positive externality

1. The private marginal cost exceeds the social marginal cost.
2. The social marginal cost exceeds the private marginal cost.
3. The social and private marginal benefits are identical.
4. The private marginal benefit exceeds the social marginal benefit.
5. None of the above.

#14) Real property differs from other types of property in that

            a) Property rights apply to it.

            b) It is tangible.

            c) Its property rights may be unbundled.

            d) Its property rights may be bundled.

            e) None of the above.

                       

#15) Assuming that outside prison rich people earn a higher hourly wage than poor people, then a prison sentence of one month will, in dollar terms

1. Hurt a poor person more than a rich person.
2. Hurt a rich person more than a poor person.
3. Hurt both a rich and a poor person equally.
4. Will hurt no one in dollar terms since no fine is paid.

            e)   None of the above.

Answer 1

12) The correct answer is option b) because the income of poor person is less than the rich person and a tax will reduce the purchasing power of the poor person as he will be left with a much lower amount than a rich person.

13) The correct answer is option e) because for a positive externality social marginal benefits are greater than private marginal benefits.

14) The correct answer is option b)

15) The correct answer is option b) because the opportunity cost is higher for the rich person.