Question

1. Suppose a new search engine company is created where they rank websites based on their factual content rather than popularity. Would there be any benefits to society?

a. No, the most popular sites are the most factual sites as well.

b. No, the root source is uneducated citizens and this does not help that problem.

c. Yes, but the benefits would be tiny because little misinformation is shared online.

d. Yes, people have limited time to educate themselves, and if the first few sites listed where the most factual people can educate themselves quickly.

2. Which of the following government regulations is an efficient role for the government in our economy because it does correct for a market failure?

a. Since there is much uncertainty regarding fossil fuel energy exploration, to lessen the uncertainty for oil companies, it is efficient for the government to provide them subsidies in the form of tax breaks for any wasted exploration expenses.

b. Since a market economy providing too many options of one good is a market failure, such as the myriad variety of diamonds, it is efficient for government regulation to limit the number of options so buyers aren’t so overwhelmed.

c. Since storm water run-off ends up decreasing water quality, it is efficient for the government to subsidize household’s installation of rain barrels and rain gardens which reduces storm water runoff.

d. Since the recent decrease in the price of oil is hurting U.S. oil producers, it is efficient to decrease competition in the U.S. from foreign oil by imposing trade restrictions.

3. In which of the following situations is there a “market failure”?

a. In the market for coal, mountain top removal of coal in West Virginia causes increased pollution in local streams.

b. A government’s unsuccessful advertising campaign for electric cars has reduced the demand for them.

c. The government fails to provide leases to oil producers thus decreasing the expected supply of oil.

d. Due to the price of oil decreasing, many new companies providing support to oil producers in the U.S. are going bankrupt.

Answer 1

1. Ans: d.  Yes, people have limited time to educate themselves, and if the first few sites listed where the most factual people can educate themselves quickly.

2. Ans: c. Since storm water run-off ends up decreasing water quality, it is efficient for the government to subsidize household’s installation of rain barrels and rain gardens which reduces storm water runoff.

3. Ans: a. In the market for coal, mountain top removal of coal in West Virginia causes increased pollution in local streams.