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Practice Test Chapter 10-14

Practice Test Chapter 10-14 - Practice Test Chapter 10-14...

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Practice Test Chapter 10-14 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. An externality is a. the costs that parties incur in the process of agreeing and following through on a bargain. b. the uncompensated impact of one person's actions on the well-being of a bystander. c. the proposition that private parties can bargain without cost over the allocation of resources. d. a market equilibrium tax. Figure 10-5 ____ 2. Refer to Figure 10-5. Which price and quantity combination represents the social optimum? ____ 3. The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that a. over time, the aquifer is likely to be overused. b. each farmer has a sufficient incentive to conserve the water. c. state governments have an incentive to insure that their farmers do not overuse the water. d. resources would be used more efficiently if the government paid for the pumps farmers use to get the water. ____ 4. Before considering any public project, the government should (i) compare the total cost and total benefits of the project. (ii) conduct a cost-benefit analysis. (iii) infer that citizens who vote for a project are willing to pay equally for it.
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Scenario 13-3 Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his
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