Practice_I - Practice Exam Public Policy and Business...

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Unformatted text preview: Practice Exam Public Policy and Business Purdue University Fall 2006 Three renowned social philosophers sit down to share a pitcher of beer and debate the issue of equity in distribution. Karl Marx is an Egalitarian, though he claims his views are more nuanced than such a label would suggest. Jeremy Bentham is, of course, a Utilitarian. And John Rawls is a Rawlsian. The pitcher holds 9 glasses of beer. The tables below give the utility, or satisfaction, each gentleman derives from different levels of beer consumption: 1. Karl, considering his Egalitarian views, would suggest the he receive ____ glasses of beer, Jeremy receive _____glasses of beer, and John receive _____ glasses of beer. a) 2; 4; 3 b) 3; 3; 3 c) 4; 3; 2 d) 4; 2; 3 e) 5; 2; 2 2. Jeremy Bentham, the Utilitarian, considers this distribution for awhile, and concludes: With such a distribution of beer between us, our Social Welfare equals ______ units of Utility. It may be possible that we can do better than that. a) 34 b) 54 c) 88 d) 108 e) 126 3. Jeremy would argue that the social welfare would be maximized if Karl receives _____ glasses of beer, Jeremy receives _____ glasses of beer, and John receives _____ glasses of beer. a) 2; 4; 3 b) 3; 3; 3 c) 4; 3; 2 d) 4; 2; 3 e) 5; 2; 2 4. John Rawls joins the debate: Jeremy, if we choose your distribution over Karls, Social Welfare will, in my opinion, _______. It now equals ______units of utility. a) increase; 134 d) decrease; 26 b) increase; 80 e) decrease; 16 c) remain the same; 34 5. We would expect John Rawls to argue that Karl should receive ____ glasses of beer, Jeremy should receive ____ glasses of beer, and John should receive ____ glasses of beer. a) 2; 4; 3 b) 3; 3; 3 c) 4; 3; 2 d) 4; 2; 3 e) 5; 2; 2 6. Consider the market shown here. Imposing a tax of $4/unit sold on this market will create a deadweight loss for society equal to: a) $0 b) $2,000 c) $4,000 d) $8,000 e) None of the above are correct. Karl Glasses of Beer Total Utility 1 20 2 38 3 54 4 68 5 80 6 90 John Glasses of Beer Total Utility 1 16 2 28 3 38 4 46 5 52 6 56 Jeremy Glasses of Beer Total Utility 1 14 2 26 3 34 4 38 5 40 6 41 P Q Demand Supply $10 10,000 $5 5,000 7. A Kaldor-Hicks improvement in efficiency is achieved by a court decision or change in public policy under which: a) winners could compensate losers and still be better off. b) both external costs and benefits, which are sources of market failure, are considered. c) the dollar benefits for winners exceed dollar losses of losers. d) at least one person is made better off and nobody is made worse off. e) external costs associated with production of goods and services are minimized. 8. A Marshallian improvement in efficiency is achieved by a court decision or change in public policy under which: a) winners could compensate losers and still be better off....
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This note was uploaded on 03/18/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue University-West Lafayette.

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Practice_I - Practice Exam Public Policy and Business...

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