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cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on
their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the
majority of residents would vote “yes?”
a.
1 acre
b.
2 acres
c.
3 acres
d.
4 acres
65. Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the
cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build?
a.
0 acres
b.
1 acre
c.
2 acres
d.
3 acres
66. Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the
cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that
maximizes total surplus from the park, how much total surplus will Sophia receive?
a.
-$5
b.
-$2
c.
$0
d.
$2
67. Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the
cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that
maximizes total surplus from the park, how much total surplus will Amber receive?
a.
$0
b.
$26
c.
$32
d.
$56
Table 11-2
Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town
does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights
on Main Street and are trying to determine how many lights to install. The table below shows each family’s willingness to
pay for each streetlight.
Number of
Streetlights
The Greene Family
The Brown Family
The Black Family
1
$340
$480
$420
2
260
380
400
3
160
260
340
4
40
130
240
5
0
50
100
6
0
0
20
68. Refer to Table 11-2. Suppose the cost to install each streetlight is $900. How many streetlights should the town install
to maximize total surplus from the streetlights?
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
69. Refer to Table 11-2. Suppose the cost to install each streetlight is $360. How many streetlights should the town install
to maximize total surplus from the streetlights?
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
70. Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost
of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision
solely on their own willingness to pay (and trying to maximize their own surplus), what is the greatest number of
streetlights for which the majority of families would vote “yes?”
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
71. Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost
of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision
solely on their own willingness to pay (and trying to maximize their own surplus), what is the greatest number of
streetlights for which the majority of families would vote “yes?”
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
72. Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost
of installing the streetlights equally. To maximize their own surplus, how many streetlights would the Greene’s like the
town to install?
a.
0 streetlights
b.
1 streetlight
c.
2 streetlights
d.
3 streetlights
73. Refer to Table 11-2. Suppose the cost to install each streetlight is $600 and the families have agreed to split the cost
of installing the streetlights equally. To maximize their own surplus, how many streetlights would the Brown’s like the
town to install?
a.
0 streetlights
b.
1 streetlight
c.
2 streetlights
d.
3 streetlights
74. Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost
of installing the streetlights equally. To maximize their own surplus, how many streetlights would the Black’s like the
town to install?
a.
0 streetlights
b.
1 streetlight
c.
2 streetlights
d.
3 streetlights
75. Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost
of installing the streetlights equally. If the residents choose to install the number of streetlights that will maximize total
surplus from the streetlights, how much total surplus will the Greene family receive?
a.
-$40
b.
$0
c.
$40
d.
$60
76. Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost
of installing the streetlights equally. If the residents choose to install the number of streetlights that will maximize total
surplus from the streetlights, how much total surplus will the Greene family receive?
a.
-$80
b.
$320
c.
$360
d.
$480
Table 11-3
This table describes the police protection demands for three equal sized groups of people in Safetyville. The second, third,
and fourth columns show the number of person-hours of police protection per day that a group will demand for a given
price (the first column).
Price
Group #1
Group #2
Group #3
$42
0
0
0
$36
0
0
9
$30
0
9
18
$ 24
9
18
39
$ 18
18
39
66
$ 12
39
66
99
$ 6
66
99
132
$ 0
99
132
174
77. Refer to Table 11-3. What is the value of the 99th unit of police protection in Safetyville?
a.
$0
b.
$6
c.
$12
d.
$18
78. Refer to Table 11-3. What is the value of the 39th unit of police protection in Safetyville?
a.
$24
b.
$42
c.
$54
d.
$72
79. Refer to Table 11-3. If the marginal cost of police protection is constant at $36 per person-hour, what is the efficient
level of police protection to provide?
a.
9 units
b.
39 units
c.
66 units
d.
99 units
80. Refer to Table 11-3. If the marginal cost of police protection is constant at $72 per person-hour, what is the efficient
level of police protection to provide?
a.
9 person-hours
b.
18 person-hours
c.
39 person-hours
d.
66 person-hours
Table 11-4
There are four homes along Belmont Circle, which surrounds a small plot of land. The land currently has no trees, and the
4 homeowners -- Adams, Benitez, Chen, and Davis -- are considering the idea of contributing to a pool of money that will
be used to plant up to 4 trees. The table represents their willingness to pay, that is, the maximum amount that each
homeowner is willing to contribute toward each tree.
Adams
Benitez
Chen
Davis
First tree
$100
$115
$120
$90
Second tree
50
110
110
50
81. Refer to Table 11-4. Suppose the cost to plant each tree is $300. How many trees should be planted to maximize the
total surplus of the four homeowners?
a.
1
b.
2
c.
3
d.
4
82. Refer to Table 11-4. Suppose the cost to plant each tree is $90. How many trees should be planted to maximize the
total surplus of the four homeowners?
a.
1
b.
2
c.
3
d.
4
83. Refer to Table 11-4. Suppose the cost to plant each tree is $380 and the 4 homeowners have agreed to split all tree-
planting costs equally. Which homeowner(s) would be opposed to planting any trees?
a.
only Davis
b.
only Adams and Davis
c.
only Adams, Benitez, and Davis
d.
Adams, Benitez, Chen, and Davis
84. Refer to Table 11-4. Suppose the cost to plant each tree is $120 and the 4 homeowners have agreed to split all tree-
planting costs equally. How many trees would Adams prefer to plant?
a.
0
b.
1
c.
2
d.
3
85.
Refer to Table 11-4. Suppose the cost to plant each tree is $220 and the 4 homeowners have agreed to split all tree-
planting costs equally. Which homeowner(s) would be in favor of planting at least 3 trees?
a.
only Benitez
b.
only Benitez and Chen
c.
only Benitez, Chen, and Davis
d.
Adams, Benitez, Chen, and Davis
86. Refer to Table 11-4. Suppose the cost to plant each tree is $340 and the 4 homeowners have agreed to split all tree-
planting costs equally. Which homeowner(s) would be in favor of planting at least 1 tree?
a.
only Benitez
b.
only Benitez and Chen
c.
only Benitez, Chen, and Davis
d.
Adams, Benitez, Chen, and Davis
87. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750. How many ferry trips should there
be to maximize the total surplus of the four business owners?
a.
1
b.
2
c.
3
d.
4
88. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000. How many ferry trips should there
be to maximize the total surplus of the four business owners?
a.
1
b.
2
c.
3
d.
4
89. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $500. How many ferry trips should there
be to maximize the total surplus of the four business owners?
a.
1
b.
2
c.
3
d.
4
90. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750. Then total surplus for the 4 business
owners is
a.
$330 if there is 1 ferry trip.
b.
$370 if there are 2 ferry trips.
c.
$150 if there are 3 ferry trips.
d.
All of the above are correct.
91. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750. Then total surplus for the 4 business
owners is
a.
$750 if there is 1 ferry trip.
b.
$40 if there are 2 ferry trips.
c.
$150 if there are 3 ferry trips.
d.
-$400 if there are 4 ferry trips.
92. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750 per day and the 4 business owners
have agreed to split the costs of the ferry trips equally. Which business owner(s) would be opposed to having any ferry
trips?
a.
only the owner of Store B
b.
only the owners of Stores A and B
c.
only the owners of Stores A and B and Restaurant 2
d.
All 4 business owners would be opposed to paying for any ferry trips.
93. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750 per day and the 4 business owners
have agreed to split the costs of the ferry trips equally. How many ferry trips would the owner of Restaurant 1 prefer to
have?
a.
0
b.
1
c.
2
d.
3
94. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000 per day and the 4 business owners
have agreed to split the costs of the ferry trips equally. How many ferry trips would the owner of Store A prefer to have?
a.
0
b.
1
c.
2
d.
3
95. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750 per day and the 4 business owners
have agreed to split the costs of the ferry trips equally. Which of the following statements is correct?
a.
The owner of Restaurant 1 would prefer to have 3 ferry trips.
b.
The owner of Restaurant 2 would prefer to have 2 ferry trips.
c.
The owner of Store A would prefer to have 1 ferry trip.
d.
All of the above are correct.
96. Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000 per day and the 4 business owners
have agreed to split the costs of the ferry trips equally. Which of the following statements is correct?
a.
The owner of Restaurant 1 would prefer to have 2 ferry trips.
b.
The owner of Restaurant 2 would prefer to have 1 ferry trip.
c.
The owners of Stores A and B would prefer to have 0 trips.
d.
All of the above are correct.
97. If the government decides to build a new highway, the first step would be to conduct a study to determine the value of
the project. The study is called a
a.
budget analysis.
b.
project analysis.
c.
reimbursement analysis.
d.
cost-benefit analysis.
98. Suppose the cost to erect a tornado siren in a small town is $15,000. In addition, suppose the value of a human life is
$10 million. By what percentage would the siren need to reduce the risk of a fatality for the benefits of the siren to exceed
the costs of the siren?
a.
By at least 0.015 percentage points.
b.
By at least 0.15 percentage points.
c.
By at least 1.5 percentage points.
d.
By at least 5 percentage points.
99. Studies that compare the wages of more risky and less risky occupations estimate the value of a human life to be about
a.
$1 million.
b.
$5 million.
c.
$10 million.
d.
$20 million.
100. Which of the following is not a reason that the findings of cost-benefit analyses on public goods are only rough
approximations?
a.
Without prices, it is difficult to be sure how much people really value a good.
b.
Analysts can't be sure that the respondents to surveys are telling the truth.
c.
Analysis must include not only the cost of building the project but also the cost of maintenance, if any.
d.
People value goods differently if they are publicly provided rather than privately provided.
101. Which of the following is an approach used by economists to calculate the value of a human life?
a.
comparing the salaries of people who live in cities with more traffic lights to those who live in cities with
fewer traffic lights
b.
comparing the wages of more risky occupations to less risky occupations
c.
comparing the costs of vehicles with safety features such as side-impact airbags to those without such safety
features
d.
All of the above are correct.
102. Miguel, Maria, and Marcos all would like a place to sit while waiting at their children’s bus stop. The neighborhood
association is considering installing several park benches at the bus stop. Miguel values the benches at $20, Maria at $30,
and Marcos at $40. The park benches and labor for installation cost $100. If Miguel, Maria, and Marcos are the only
residents who value the benches, what should the neighborhood association do?
a.
Install the park benches because people like places to sit.
b.
Install the park benches because the benefits outweigh the costs.
c.
Do not install the park benches because the costs outweigh the benefits.
d.
Do not install the park benches to prevent the Tragedy of the Commons problem of overuse.
