Question 1

When people determine the quantity of education they will undertake, they ________ the external benefits. As a result, if education were left to an unregulated market, people would undertake too ________ education.
A) overvalue; much
B) ignore; much
C) ignore; little
D) overvalue; little

Accepted Answer

The answer of When people determine the quantity of education...

Question 2

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good
A) is zero.
B) equals the marginal social benefit.
C) equals the marginal social cost.
D) equals the marginal private cost.

Accepted Answer

If the marginal social benefit of a good equals the marginal private benefit of the good, it means that there are no external benefits being generated by the use of the good. Therefore, the marginal external benefit of the good is zero.

Question 3

The benefit from an additional unit of a good or service that people other than the consumer of that good or service receives is the
A) marginal private benefit.
B) marginal external benefit.
C) marginal social benefit.
D) opportunity cost.

Accepted Answer

The benefit that people other than the consumer receive is an external benefit and the additional benefit from one more unit is the marginal benefit. Therefore, the correct term for this is marginal external benefit.

Question 4

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. When calculating the marginal social benefit of the vaccine, it is necessary to include
A) only the marginal private benefit.
B) only the marginal external benefit.
C) both the marginal private benefit and the marginal external benefit.
D) either the marginal private benefit or the marginal external benefit, whichever is larger.

Accepted Answer

The marginal social benefit of the HPV vaccine includes both the marginal private benefit (benefits to the individual who receives the vaccine) and the marginal external benefit (benefits to others who may be protected from HPV transmission). Both of these benefits are important to consider when calculating the overall societal benefit of the vaccine. Choosing option A or B would ignore one of these important components of the vaccine's benefits, and choosing option D would be incorrect as it suggests that only one benefit should be considered, which is not the case.

Question 5

Rational ignorance suggests that voters will
A) be ignorant about all issues.
B) be ignorant about issues that are of no special interest to them.
C) pursue information on all issues before voting.
D) avoid voting if they have no information.

Accepted Answer

Rational ignorance suggests that voters will be ignorant about issues that are of no special interest to them, meaning they will not bother to seek out information on topics that do not directly affect them or that they do not have a strong opinion about. They may still seek out information on issues they care about or that they feel strongly about, but will not necessarily expend effort on all issues before voting.

Question 6

Bureaucratic overprovision of a public good could occur because
A) of a failure of minimum differentiation.
B) of rational ignorance among voters.
C) voters want more of the good than do bureaucrats.
D) bureaucrats attempt to maximize efficiency.

Accepted Answer

The answer of Bureaucratic overprovision of a public good could...

Question 7

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?
A) the price and marginal private benefit
B) the economically efficient output
C) the price and the marginal social benefit
D) the size of the deadweight loss

Accepted Answer

The answer of Individuals making decisions about how much to...

Question 8

In the political market place, typical voters
A) support policies that they think will make the poor better off.
B) fire bureaucrats who support efficient policies.
C) are fully informed.
D) are sometimes rationally ignorant about a policy.

Accepted Answer

Typical voters are often rationally ignorant about a policy. This means that they do not invest the time and effort required to become fully informed about every policy issue. Instead, they often rely on simple heuristics or cues from trusted sources in order to form their opinions and make voting decisions. This can lead to biases and uninformed opinions, which can in turn influence election outcomes and political processes.

Question 9

Rational ignorance about the efficient quantity of a public good can result in
A) the principle of minimum differentiation.
B) excludable goods.
C) bureaucratic overprovision of a good.
D) the vertical summation of individual's marginal benefit curves.

Accepted Answer

Rational ignorance occurs when individuals do not acquire information about a public good because the costs of doing so outweigh the benefits. As a result, they may not be fully aware of the efficient quantity of the public good. This can lead to bureaucratic overprovision of the good, as the government may provide more of the good than is socially optimal due to the lack of information and feedback from citizens.

Question 10

In an unregulated, competitive market, less than the efficient quantity of education is produced and consumed because
A) the decisions to produce and consume education are based on marginal private costs and marginal private benefits.
B) the decisions to produce and consume education are based on marginal social costs and marginal social benefits.
C) the decisions to produce and consume education are based on marginal private benefits and marginal social costs.
D) marginal private costs are consistently greater than marginal private benefits.

Accepted Answer

In an unregulated, competitive market, individuals only consider their own costs and benefits when deciding how much education to consume or produce. As a result, they will not take into account the positive externalities (or spillover effects) of education, such as increased productivity or reduced crime rates, that benefit society as a whole. Therefore, the market will not produce and consume the efficient quantity of education. This is because the efficient quantity is based on the balance between marginal private costs (the cost that one individual pays to produce or consume education) and marginal social benefits (the benefit that society as a whole receives from education). Since individuals only consider their own private costs and benefits, they will not reach the socially efficient outcome.

Question 11

The fact that you may not know who your congressional representative is represents
A) rational ignorance on your part.
B) the rival nature of information.
C) inefficient oversupply of public servants.
D) the use of the median voter theorem.

Accepted Answer

Rational ignorance refers to the decision to not acquire information because the cost of doing so outweighs the potential benefit. In the case of not knowing one's congressional representative, the cost of acquiring that information (such as time or effort) may outweigh the perceived benefit of having that knowledge due to a lack of direct impact on one's daily life.

Question 12

The marginal private benefit of education is
A) less than the marginal social benefit.
B) equal to the marginal social benefit.
C) greater than the marginal social benefit.
D) equal to the marginal social cost.

Accepted Answer

The marginal private benefit of education includes only the benefits that accrue to the individual who is receiving the education, such as higher future income and better employment opportunities. However, education also has external benefits, such as a more productive workforce, less crime, and a more informed electorate. These external benefits are not captured in the marginal private benefit and are accounted for in the marginal social benefit. Therefore, the marginal private benefit of education is less than the marginal social benefit.

Question 13

Suppose that the marginal social benefit from another unit of a public good is less than the marginal social cost of producing it. Then
A) the principle of minimum differentiation means that production should be decreased.
B) the number of free riders is at its efficient amount.
C) less of the product should be produced because its provision exceeds the efficient level.
D) more of the product should be produced because its provision is less than the efficient level.

Accepted Answer

The marginal social benefit is less than the marginal social cost, which means that producing more of the public good would lead to a net loss in social welfare. Therefore, less of the public good should be produced, bringing its provision down to the efficient level. This is consistent with the optimal level of provision of any public good, which is where the marginal social benefit equals the marginal social cost.

Question 14

When individuals make decisions about how much schooling to obtain, they
A) do not take account of the personal benefits that it creates.
B) do not take account of the external benefits that it creates.
C) overvalue the personal benefits that it creates.
D) overvalue the external benefits that it creates.

Accepted Answer

Individuals may only consider their own personal benefits, such as increased earning potential, when deciding how much schooling to obtain. However, obtaining more education also creates external benefits for society, such as a more skilled and productive workforce and reduced social welfare costs. Therefore, individuals may not take these external benefits into account when making their decisions.

Question 15

When external benefits are present,
A) competitive markets are efficient.
B) competitive markets are inefficient.
C) a tax is required to eliminate the inefficiency.
D) property rights have already been established.

Accepted Answer

When external benefits are present, competitive markets are inefficient because the market fails to account for the positive effects of the activity on society as a whole. As a result, too little of the activity is produced and consumed in the market, leading to a deadweight loss. Therefore, government intervention such as subsidies or regulation may be necessary to achieve an efficient outcome.

Question 16

"I know that my vote alone will not influence whether or not any new foreign trade legislation is enacted, so I have decided not to spend the time learning about various legislative proposals." This quote reflects an example of
A) the free-rider problem.
B) government failure.
C) rational ignorance.
D) voter inefficiency.

Accepted Answer

This quote reflects an example of rational ignorance which occurs when an individual chooses not to acquire knowledge about a particular topic or issue because they believe that their individual actions will not have an impact on the outcome. In this case, the individual believes that their vote alone will not influence the enactment of foreign trade legislation, and therefore, has decided not to spend time learning about various legislative proposals.

Question 17

Suppose your neighbor has a beautiful garden. The benefit that she enjoys from her garden is called ________ and the benefit the rest of the neighborhood enjoys is called ________.
A) marginal private benefit; marginal external benefit
B) private cost; external cost
C) marginal social benefit; marginal external benefit
D) marginal external benefit; marginal social benefit

Accepted Answer

The answer of Suppose your neighbor has a beautiful garden....

Question 18

The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the
A) marginal private benefit.
B) marginal external benefit.
C) marginal social benefit.
D) opportunity cost.

Accepted Answer

The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the marginal social benefit, which includes both the private benefit to the individual consumer and any external benefits that accrue to others outside of the market transaction. The marginal private benefit (option A) only reflects the benefit to the individual consumer, while the marginal external benefit (option B) only reflects benefits to third parties who are not directly involved in the market transaction. Option D, opportunity cost, is not relevant to this question as it refers to the value of the next best alternative forgone when a choice is made.

Question 19

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the
A) marginal private benefit.
B) marginal external benefit.
C) marginal social benefit.
D) opportunity cost.

Accepted Answer

The benefit from an additional unit of a good or service that the consumer of that good or service receives is known as the marginal private benefit.

Question 20

________ is the benefit that a consumer of a good or service receives.
A) Marginal private benefit
B) Marginal external benefit
C) Marginal social benefit
D) Both answers A and B are correct.

Accepted Answer

Marginal private benefit is the benefit that a consumer of a good or service receives. It refers to the additional satisfaction or utility obtained by a consumer as a result of consuming an additional unit of a good or service. Marginal external benefit, on the other hand, refers to the additional benefit that accrues to third parties as a result of a particular economic activity, such as planting trees in a public park. Marginal social benefit is the sum of marginal private benefit and marginal external benefit, and represents the total benefit to society. Thus, only answer A is correct as it correctly defines the benefit received by a consumer.

Quiz 16: Public Choices and Public Goods

When people determine the quantity of education they will undertake, they the external benefits. As a result, if education were left to an unregulated market, people would undertake too education.

If the marginal social benefit of a good equals the marginal private benefit of the good, then the marginal external benefit of the good

The benefit from an additional unit of a good or service that people other than the consumer of that good or service receives is the

The HPV vaccine protects against human papillomavirus (HPV) that causes cancer. It protects both the person getting the vaccine and the sexual partners of that person. When calculating the marginal social benefit of the vaccine, it is necessary to include

Rational ignorance suggests that voters will

Bureaucratic overprovision of a public good could occur because

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

In the political market place, typical voters

Rational ignorance about the efficient quantity of a public good can result in

In an unregulated, competitive market, less than the efficient quantity of education is produced and consumed because

The fact that you may not know who your congressional representative is represents

The marginal private benefit of education is

Suppose that the marginal social benefit from another unit of a public good is less than the marginal social cost of producing it. Then

When individuals make decisions about how much schooling to obtain, they

When external benefits are present,

"I know that my vote alone will not influence whether or not any new foreign trade legislation is enacted, so I have decided not to spend the time learning about various legislative proposals." This quote reflects an example of

Suppose your neighbor has a beautiful garden. The benefit that she enjoys from her garden is called and the benefit the rest of the neighborhood enjoys is called .

The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the

The benefit from an additional unit of a good or service that the consumer of that good or service receives is the

________ is the benefit that a consumer of a good or service receives.