Government and Efficiency: Sample Quiz

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1. The first unit of the product Xterious is valued by Jim at $15.00, by Tim at $12.00, and by Kim at $10.00. No one else places any value on this product. The social value of this product, that is, the value economists would use to determine economic efficiency, is:

$15 if this product is a private good but $37.00 if it is a public good.
 $15 if this product is a public good but $37.00 if it is a private good.
 $15, regardless if the product is a private or public good.
 $37, regardless if the product is a private or public good.

2. A major reason that state-run lotteries have become very popular as sources of government revenue is that:

they are a more progressive way to raise revenue than the state income tax.
 they encourage behavior that corrects market failure.
 the gambling industry has used its political muscle to push state lotteries through state legislatures.
 because people voluntarily buy lottery tickets, they are an easy way to raise revenue.

3. Economists using economic theory to study criminal behavior are most likely to begin with what assumption?

Criminals suffer from a social pathology.
 Criminals are self-interested just as the rest of us.
 Criminals are genetically inclined to commit crime.
 Criminals are generally mentally ill.

Answer the next three questions based on this information.

Suppose that goods A, B, and C are all public goods. The values that five citizens place on them are shown as follows.

Citizen:
Good A
Good B
Good C

Adams
$4
$2
$5

Benson
4
2
6

Carter
6
3
7

Dunn
3
6
1

Edgar
4
6
1

4. Based on the information in this table and the assumption that no other people's values matter, the total value of item B is:

$2. $3. $6. $19.

5. If identical resources are used in the production of these three goods and only one will be chosen, the economically efficient outcome is:

A. B. C. either B or C.

6. If the outcome is decided by majority voting and only one will be chosen, the most likely winner is:

A. B. C. indeterminate.

7. Television signals can be scrambled so that only those who pay for a special decoder can watch the shows. Scrambled television broadcasts are an example of a good that is:

nonrival and nonexcludable, hence a public good.
 nonrival but excludable.
 rival but nonexcludable.
 rival and excludable, and hence a private good.

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Copyright Robert Schenk