1. Suppose the marginal benefit (MB) of national defense is MB = 1,000 - 10Q, where Q measures units of national defense, for Charlie and MB = 400 - 4Q for Sally. Combining Charlie's and Sally's marginal benefits yields social MB = 1,400 - 14Q. If the marginal cost of providing national defense is constant and equal to 840 (measured in the same units as marginal benefit), the efficient level of national defense is:
A. 16 units.
B. 24 units
C. 40 units
D. 100 units.
2.Television broadcasts are often given as examples of a public good. However, it is possible to code a broadcast so that only people who pay for the decoder box can view it. The use of a coded signal does what to a television broadcast?
A. Makes it rival
B. Makes it nonrival.
C. Makes it excludable.
D. Makes it nonexcludable.
3. In economic terminology, a free rider is someone who:
A. does not pay for their own consumption of a public good.
B. chooses not to consume a public good.
C. is earning economic profit.
D. raises his or her prices because all other prices are rising.
4. Adverse selection problems are most likely to be a problem when:
A. one side of the market, either buyer or seller, has better information than the other side.
B. there are public goods involved.
C. the good being exchanged has negative externalities.
D. the good being exchanged has free-rider problems.