QUESTION 32Pam and Kunal are the only members of a community that is trying to determine how much of a public good should be produced. Suppose thatPam is willing to pay $10 for the fourth unit of the public good and that Kunal is willing to pay $6 for the fourth unit. The marginal cost ofproducing the public good is constant at $4. Which is TRUE?O a. Fewer than four units of the public good should be produced.O b. More than four units of the public good should be produced.Oc. Exactly four units of the public good should be produced.Od. The Lindahl equilibrium is established when the price of the public good is $10.QUESTION 33If an insured patient pays the full cost of the first $5,000 of medical expenses per year, what is that $5,000 amount called?O a. copaymentOb.premiumc. coinsuranced. deductibleQUESTION 34Matt's utility function is given by U= In(C), where Cis consumption. He earns $45,000 per year and races stock cars in his spare time. There'sa 10% chance that he will crash on the racetrack in the next 12 months and incur medical costs of $15,000. He will also have to miss work andwill lose about $5,000 in earnings. Assume he buys insurance to cover medical expenses and forgone wages. What is Matt's expected utility ifhe buys the insurance policy at the actuarially fair price?a. 10.61b.9.60c. 10.67d. 20.84QUESTION 35Which is a problem that must be overcome to achieve the Lindahl solution?O a. Individuals tend to overreport their valuation of a public good.O b. Individuals may not ow their valuation of a public good.O c. Individual values cannot be obtained.Od. Individuals demand larger quantities of a public good when their tax shares increase.QUESTION 36Which illustrates the samaritan's dilemma?O a. People forego buying flood insurance, knowing the government will step in with financial support in the event of flooding.O b. Once people have government-provided flood insurance, they act irresponsibly, building flood-vulnerable structures.Oc. Flood insurance companies know that those who buy flood insurance are mostly those with the most flood-prone lands, forcing thecompanies to raise premiums above many people's willingness to pay.O d. Government-provided flood insurance crowds out privately provided flood insurance, leading to inefficiency in the provision of floodinsurance.

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QUESTION 32 Pam and Kunal are the only members of a community that is trying to determine how much of a public good should be produced. Suppose that Pam is willing to pay $10 for the fourth unit of the public good and that Kunal is willing to pay $6 for the fourth unit. The marginal cost of producing the public good is constant at $4. Which is TRUE? O a. Fewer than four units of the public good should be produced. O b. More than four units of the public good should be produced. O c. Exactly four units of the public good should be produced. Od. The Lindahl equilibrium is established when the price of the public good is $10.

QUESTION 32 Pam and Kunal are the only members of a community that is trying to determine how much of a public good should be produced. Suppose that Pam is willing to pay $10 for the fourth unit of the public good and that Kunal is willing to pay $6 for the fourth unit. The marginal cost of producing the public good is constant at $4. Which is TRUE? O a. Fewer than four units of the public good should be produced. O b. More than four units of the public good should be produced. O c. Exactly four units of the public good should be produced. Od. The Lindahl equilibrium is established when the price of the public good is $10.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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