Student name:__________

MULTIPLE CHOICE - Choose the one alternative that

best completes the statement or answers the question.
1) Answer the question based on the following
information for a public good. Pa and Pb are the prices that
individuals A and B are willing to pay for the last unit of a
public good, rather than do without it. These people are the
only two members of society.

Q Pa Pb 5 0 1
1 $3 $5 The collective willingness
2 2 4 of this society to pay for
3 1 3 the third unit of this public
4 0 2 good is

D) $8.
A) $2. E) $6.
B) $4.
C) $1.

2) Answer the question based on the following only two members of

information for a public good. Pa and Pb are the prices that society.
individuals A and B are willing to pay for the last unit of a
public good, rather than do without it. These people are the

Q Pa Pb 5 0 1
1 $3 $5 If the marginal cost of
2 2 4 producing this good at the
3 1 3 optimal quantity is $6, the
4 0 2 optimal quantity must be

D) 1 unit.
A) 4 units. E) 3 units.
B) 2 units.
C) 5 units.

3) Suppose that Mick and Cher are the only two members of society and are

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willing to pay $10 and $8, respectively, for the third unit of a unit is $17. We can
public good. Also, assume that the marginal cost of the third conclude that

D) 4 units should
A) the third unit should not be produced. be produced.
B) zero units should be produced.
C) the third unit should be produced.

4) Alex, Kara, and Susie are the only three people in a

community. Alex is willing to pay $20 for the fifth unit of a
public good; Kara, $15; and Susie, $25. Government should
produce the fifth unit of the public good if the marginal cost is
less than or equal to

D) $15.
A) $60. E) $25.
B) $20.
C) $45.

5) Alex, Kara, and Susie are the only three people in a amount that Susie must be
community. Alex is willing to pay $40 for the third unit of a willing to pay for it to be
public good; Kara is willing to pay $25. If the marginal cost efficient for government to
of producing the third unit is $95, what is the minimum produce the third unit?

C) $30
A) The amount cannot be determined with the D) $65
information provided. E) $125
B) $95

6) [MISSING IMAGE: , ]
[MISSING IMAGE: , ]
Refer to the graphs which show demand curves reflecting
the prices Alvin and Elmer are willing to pay for a public
good, rather than do without it. The collective willingness to
pay for the third unit of this public good is

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 D) $2.
A) $6. E) $14.
B) $10.
C) $18.

7) The following data are for a series of increasingly

extensive flood-control projects.

Total Cost Total Benefit Plan D

Per Year Per Year =
Plan A = Levees $10,000 $16,00 Large
0 Reserv
oir
Plan B = Small 24,000 36,000
Reservoir For Plan A marginal costs
Plan C = Medium 44,000 52,000 and marginal benefits are
Reservoir

D) $20,000 and
A) $20,000 and $16,000, respectively. $32,000, respectively.
B) $10,000 and $16,000, respectively.
C) $16,000 and $26,000, respectively.

8) Answer the question based on the following All figures are in millions
information for four highway programs of increasing scope. of dollars.

Program Total Cost Total Benefit D 2 2

A $2 $9 0 3
B 6 16 Based on the data, we can
C 12 21 say that the marginal
benefits of Program B are

C) $2.
A) $10. D) $7.
B) $9.

9) New Normal
University has found it
necessary to institute a

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crime-control program on its campus to deal with the high table shows the expected
costs of theft and vandalism. The university is now total annual costs and
considering several alternative levels of crime control. This benefits of these
alternatives.

Total Total Officers 0

Costs Benefits Per With 0
Per Year Guard Dog
Year (reduction in Level 6
the costs of Five -2 0
crime) Security ,
Level One -1 Security $20, $80,0 Officers 0
Officer 000 00 With 0
Level Two -1 Security 30,0 120,0 Guard Dog 0
Officer With Guard Dog 00 00 and
Patrol
Level Three -1 Security 40,0 140,0
Car
Officer With Guard Dog 00 00
and Patrol Car The marginal benefits of
Level Four -2 Security 50,0 155,0 crime control for Level 4
are

D) $5,000.
A) $105,000. E) $155,000.
B) $15,000.
C) $50,000.

10) Suppose that Katie and Kelly each expect to receive be $400, a majority vote
$500 worth of marginal benefits from a proposed new will
recreation center, whereas Kerry expects to receive only $100
worth. If the proposed tax levied on each for the center would

allocated to it.
A) defeat this project and resources will be D) pass this
underallocated to it. project and resources will
B) pass this project and resources will be be overallocated to it.
underallocated to it.
C) pass this project and resources will be efficiently

11) Assume that Abby,

Ben, Clara, Joe, and Matt

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are the only citizens in a community. A proposed public good $120 to Matt. In a majority
has a total cost of $1,000. All five citizens will share an equal vote, this proposal will
portion of this cost in taxes. The benefit of the public good is most likely be
$220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and

D) accepted, four
A) accepted, 3 in favor, 2 against. in favor, one against.
B) defeated, 2 in favor, 3 against.
C) defeated, 1 in favor, 4 against.

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Answer Key

Test name: Chap 05_22e_Micro_Algo

1) B
2) B
3) C
4) A
5) C
6) B
7) B
8) D
9) B
10) D
11) A

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