Exam 2 Form A - ECON 2005 Fall 2007 Name ID Second Exam KEY...

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E C O N 2 0 0 5 N a m e : Fall 2007 ID # : Second Exam: KEY A Instructions: Since a wrong answer has the same impact on your score as no answer, you should answer every question. The total time is 50 minutes. The total score is 99 points. GOOD LUCK! 1. Because public goods are-------, the free-rider problem prevents the--------from supplying them. a. rival, private market b. not excludable, private market ** c. not excludable, public sector d. rival, public sector 2. When economists refer to a production cost that has already been committed and cannot be recovered, they use the term a. opportunity cost b. variable cost c. sunk cost ** d. explicit cost 3. In the long run, a. all inputs are considered to be variable. ** b. variable inputs change to fixed inputs. c. some inputs, such as plant and machinery, remain fixed. d. inputs and technology are variable. 4. The Laffer curve a. relates (income) tax rates to total income taxes collected. ** b. Was so ridiculous that economists took it as a joke, hence the name Laffer curve. c. Relates tax rates to deadweight welfare losses. d. Relates government welfare payments to birth rates.
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5. The Coase theorem a. Incorporates transaction costs in its solutions b. Suggests that an efficient solution can be achieved if private parties can bargain without cost ** c. Applies only when the number of interested parties is sufficiently large d. All of the above 6. The amount of deadweight loss from a tax depends on a. The price elasticity of demand and supply ** b. How much of the tax revenue the government plans to spend c. The product the government is planning to tax d. All of the above are correct 7. When governments use cost-benefit analysis, their primary purpose is to a. Evaluate the gross benefits associated with private investment projects. b. Convince the public that government sponsored projects are technically feasible. c. Try to determine grass root efforts to slow the progress of government projects. d. Evaluate the costs and benefits associated with public projects. ** 8. As the size of a tax increases, a. the deadweight loss from the tax declines b. the deadweight loss from the tax remains constant c. the deadweight loss from the tax increases ** 9. Which of the following would be considered a non-rival, but excludable good: a. Viewing a movie in a crowded theater b. An ice-cream cone c. Visiting a non-crowded museum with an entry fee
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Exam 2 Form A - ECON 2005 Fall 2007 Name ID Second Exam KEY...

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