Top 80+ Solved MicroEconomics, Theory and Applications 2 MCQ Questions Answer
Q. A Pigouvian subsidy
a. cannot exist with externalities.
b. is the same thing as a pigouvian tax.
c. is measured in terms of pigouvian dollars.
d. moves production to the socially optimal level of output
Q. Which method can help in obtaining a welfare improvement if externalites exist?
a. pigouvian taxes
b. regulation
c. assigning property rights and permitting bargaining
d. all of the above
Q. Marginal damages
a. must always be considered in social marginal costs.
b. must not be considered in social marginal costs.
c. must sometimes be considered in social marginal costs.
d. have nothing to do with social marginal costs.
Q. In a public goods context, it is difficult to measure impact on real income because
a. public goods are generally free to the public.
b. they make up a small percentage of total gdp.
c. it is hard to measure how people value the public good.
d. inflation decreases the value of the goo
Q. According to the required reading from the 2003 Washington Post, a recent study by the U.S.Office of Management and Budget found that
a. the benefits of tough new clean-air regulations in the past decade were five to seven times greater than their costs
b. the most efficient way to control pollution is through pigouvian taxes
c. the 1990 clean air act has not affected the problem of acid rain
d. environmentalists are generally supportive of cost-benefit calculations in assessing
Q. According to a required reading from the 2003 Economist, the biggest problem facingIndonesia’s economy is
a. terrorism
b. an organic approach to public policy questions
c. inadequate rule of law
d. geographical (e) hobbits
Q. According to a required reading by P.J. O’Rourke, which of the following statements isfalse?
a. in most of the world, food production has well outpaced the growth of population
b. democracy may be able to help prevent famines from occurring
c. in countries experiencing famine, security and order must be established before the famine can be contained
d. famines are mainly caused by natural disasters or pestilence
Q. According to a required reading by P.J. O’Rourke, which of the following statements isfalse?
a. the pesticide ddt may have done more good than harm in some countries before it was banned
b. despite their other problems, eastern european countries did a good job protecting the environment during the communist era
c. the costs of environmental regulation exceed their benefits
d. recycling is an economically inefficient way of reducing the human impact on the environment
Q. The assigned Washington Post Op-Ed by Daniel Chirot can be interpreted as asserting that
a. inadequate education and lack of knowledge of history in the population is why saddam hussein’s government succeeded in ruling iraq for so long
b. the right way to think about saddam hussein’s government is basically as if he were the head of a mafia organization
c. saddam hussein’s government could be described as adhering to an organic philosophy
d. the biggest problem in iraq under saddam hussein was a lack of rule of law
Q. If, for John’s current intertemporal consumption pattern (satisfying his intertemporal budgetconstraint), his marginal rate of intertemporal substitution is 1 and the real rate of interest is positive, then...
a. the interest rate will fall to zero.
b. john could increase his lifetime utility by consuming more today.
c. john could increase his lifetime utility by consuming less today.
d. john is necessarily a borrower.
Q. There are strong theoretical reasons to expect that changes in wealth are responsible for changes in consumption. Nonetheless, one reason that we observe a tight link betweenconsumption and disposable income is...
a. credit rationing which changes the intertemporal budget constraint for borrowers.
b. households attempt to smooth their consumption.
c. household saving provides a buffer between income and expenditure.
d. ricardian equivalence.
Q. The accelerator principle states:
a. if an increase in the growth of output is expected, investment will increase.
b. if an increase in investment is expected, output will increase.
c. if an increase in the growth of investment is expected, output will increase.
d. small swings in investment are associated with large swings of output.
Q. In the case of a negative externality, the social marginal cost will
a. exceed the private marginal cost.
b. be equal to private marginal cost.
c. fall short of private marginal cost.
d. bear no significant relation to private marginal cost.
Q. A perfectly competitive steel mill that produces large amounts of pollution (a negativeexternality) will, from a social point of view
a. produce too little steel
b. produce the socially optimal quantity of steel.
c. produce too much steel.
d. produce too much steel only if it installs pollution control equipment.