101.Whichofthefollowingisanapproachusedbyeconomiststocalculatethevalueofahumanlife?
a.comparingthesalariesofpeoplewholiveincitieswithmoretrafficlightstothosewholiveincitieswithfewertrafficlights
b.comparingthewagesofmoreriskyoccupationstolessriskyoccupations
c.comparingthecostsofvehicleswithsafetyfeaturessuchasside-impactairbagstothosewithoutsuchsafetyfeatures
d.Alloftheabovearecorrect.
102.Miguel,Maria,andMarcosallwouldlikeaplacetositwhilewaitingattheirchildren’sbusstop.Theneighborhoodassociationisconsideringinstallingseveralparkbenchesatthebusstop.Miguelvaluesthebenchesat$20,Mariaat$30,andMarcosat$40.Theparkbenchesandlaborforinstallationcost$100.IfMiguel,Maria,andMarcosaretheonlyresidentswhovaluethebenches,whatshouldtheneighborhoodassociationdo?
a.Installtheparkbenchesbecausepeoplelikeplacestosit.
b.Installtheparkbenchesbecausethebenefitsoutweighthecosts.
c.Donotinstalltheparkbenchesbecausethecostsoutweighthebenefits.
d.DonotinstalltheparkbenchestopreventtheTragedyoftheCommonsproblemofoveruse.
103.SupposethattheTownofMapledaleisconsideringhiringanadditionalfirefighter.Theexpectedbenefitisestimatedtobeworth$5foreachofMapledale’s15,000residents.Whatshouldthecitydo?
a.Hirethefirefighterbecauseadditionalfireprotectionispriceless.
b.Hirethefirefighterifthecostofthenewfirefighterislessthan$75,000.
c.Donothirethefirefighterbecausethecostsexceedthebenefits.
d.Hirethefirefighteronlyifthebenefittotheresidentsexceeds$75,000.
104.Supposethatasmallcountyisconsideringaddingaguardrailtoadangerouscurvebyariver.Theguardrailwillcost$70,000.Theaveragedamagedonetovehiclesthatslideofftheroadatthecurveis$10,000.Itisexpectedthattheguardrailwillprevent5vehiclesfromslidingofftheroadduringitsusablelife.Whatshouldthecountydo?
a.Installtheguardrailbecausesafetyispriceless.
b.Installtheguardrailbecausethebenefitsexceedthecosts.
c.Donotinstalltheguardrailbecausethecostsexceedthebenefits.
d.Donotinstalltheguardrailatanycostbecausedriverscanpurchaseprivateinsurancefortheirvehicles.
105.Economiststhinkthatthebestwaytodeterminethevalueofahumanlifeisto
a.evaluatethevalueofaperson’sexpectedearningsinthelabormarket.
b.evaluatetheriskspeoplearewillingtotakeandwhattheywouldhavetobepaidtotakethem.
c.determineaperson’saccumulatedwealthatthetimeofdeath.
d.donothing;humanlifeispriceless.
106.Acost-benefitanalysisofahighwayisdifficulttoconductbecauseanalysts
a.cannotestimatetheexplicitcostofaprojectthathasnotbeencompleted.
b.areunlikelytohaveaccesstocostsonsimilarprojects.
c.arenotabletoconsidertheopportunitycostofresources.
d.willhavedifficultyestimatingthevalueofthehighway.
107.Cost-benefitanalystsoftenencountertheproblemthatthosewhowouldbenefitfromgovernmentprovisionofapublic good tend to
a.overstatethebenefittheywouldreceivefromthepublicgoodandthosewhowouldbeharmedbygovernmentprovisionofapublicgoodtendtooverstatethecoststheywouldincurfromthepublicgood.
b.overstatethebenefittheywouldreceivefromthepublicgoodandthosewhowouldbeharmedbygovernmentprovisionofapublicgoodtendtounderstatethecoststheywouldincurfromthepublicgood.
c.understatethebenefittheywouldreceivefromthepublicgoodandthosewhowouldbeharmedbygovernmentprovisionofapublicgoodtendtooverstatethecoststheywouldincurfromthepublicgood.
d.understatethebenefittheywouldreceivefromthepublicgoodandthosewhowouldbeharmedbygovernmentprovisionofapublicgoodtendtounderstatethecoststheywouldincurfromthepublicgood.
108.Simplyaskingpeoplehowmuchtheyvalueahighwayisnotareliablewayofmeasuringthebenefitsandcostsbecause
a.thosewhostandtogainhaveanincentivetotellthetruth.
b.thosewhostandtolosehaveanincentivetoexaggeratetheirtruecosts.
c.answerstothesurveyquestionswillalwaysbedownwardlybiased.
d.noteveryoneaskedwillbeusingthehighway.
109.Thegreatestdifficultywithcost-benefitanalysisofapublicprojectisdetermining
a.whethergovernmentrevenueissufficienttocoverthecostoftheproject.
b.whichcontractorshouldbeawardedtheproject.
c.thecostoftheproject.
d.thevalueorbenefitoftheproject.
110.Eachofthefollowingexplainswhycost-benefitanalysisisdifficultexcept
a.thereisnopricewithwhichtojudgethevalueofapublicgood.
b.surveysareoftenbiasedandunreliable.
c.itisdifficulttoidentifyallfactorsthatinfluencecostsandbenefitsofpublicgoods.
d.governmentprojectsrarelyhavesufficientfundingtocompletethemontime.
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