Econ 450 Summer 2014 Midterm - Econ 450 Summer 2014 Midterm 1 TRUE OR FALSE Justify(briey your answer 5 points each(a Claim When a government tries to

Econ 450 Summer 2014 Midterm - Econ 450 Summer 2014 Midterm...

This preview shows page 1 - 2 out of 4 pages.

Econ 450 Summer 2014 Midterm 1. TRUE OR FALSE. Justify (briefly) your answer. 5 points each. (a) Claim: When a government tries to provide a public good it will inevitably crowd-out private provision of the good one for one. (b) Suppose the government is planning construction of a new high- way. The project will require 1,000 man-hours. At a wage rate of $6/hr, the accounting cost of the labor component of the project is $6,000. Claim: A binding minimum wage indicates that the true social cost of the labor component is less than $6,000. (c) Claim: A matching grant to a local government will maximize lo- cal “targeted” spending relative to an unconditional block grant. (d) Claim: An emissions-fee system will always perform better than a cap and trade system when there is uncertainty about the marginal cost of pollution reduction. 2. Owing to geography and a heavy reliance on automobiles, Los Angeles (California) suffers from air pollution in the form of ’smog’. The Los Angeles Basin is susceptible to atmospheric inversion, which holds in the exhausts from road vehicles, airplanes, locomotives, shipping, manufacturing, and other sources. It is estimated that each “mile driven” M imposes damage in the form of smog of $100 on society. The Marginal benefit of driving for a single person (in a given year) is given by MB = 500 - M The private marginal cost of driving is 0.
Image of page 1

Subscribe to view the full document.

Image of page 2

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes