The Ohio State University Economics 4300, Government Finance in the American Economy William J. White Autumn, 2018 Second Homework Assignment Name and Dot Number ____________________________________________ Multiple Choice Questions 30 points total _____ 1. Which if of the following describes a spillover (positive externality)? a) Air pollution from a factory that dirties clothes in a nearby dry cleaner. b) Second-hand smoke in a crowded restaurant or concert venue. c) The knowledge passed on by students to their family and friends. d) The impact of one more driver on a freeway at rush hour. _____ 2. Which of the following would NOT be a command-and-control action of the Environmental Protection agency? a) Issuing tailpipe emission standards for passenger vehicles to limit carbon monoxide. b) Publishing a list of hazardous chemicals that requires notification prior to use. c) Requiring continuous monitoring of pollution-containing air and water discharges. d) Implementing a Pigovian tax on releases of sulfur dioxide into the atmosphere. _____ 3. The Clean Air Markets program is an example of: a) a market-based approach to eliminating pollution externalities. b) a command-and-control response to reduce the negative impacts of air pollution. c) a system by which industrial gas companies colluded to keep their prices high. d) yet another government program that failed to achieve its primary objective. _____ 4. The effect of a negative externality is similar to: a) A supply curve (marginal social cost) shifting to the left. b) A supply curve (marginal social benefit) shifting to the right. c) A demand curve (marginal social cost) shifting to the left. d) A demand curve (marginal social benefit) shifting to the right. _____ 5. A positive externality results from the purchase of smoke detectors. If smoke detectors are sold in a competitive market, a) the marginal social benefit of smoke detectors is less than the marginal private benefit received by any consumer. b) the marginal social benefit will exceed the marginal private benefit received by any consumer. c) in equilibrium the marginal social cost of smoke detectors will equal the marginal social benefit. d) in equilibrium the marginal social benefit of smoke detectors is zero. _____ 6. The marginal external cost associated with paper production is constant at $10 per ton per year. The competitive market equilibrium for paper production is currently 10 million tons per year. A corrective tax on paper production: a) will collect $100 million annually. b) will collect more than $100 million annually. c) will collect less than $100 million annually. d) will reduce annual damages to those other than buyers and sellers of paper to zero. _____ 7. Which of the following is true about command-and-control regulation that allows businesses to emit pollutants up to a certain point and bans emissions after that limit is reached?.

1. The Ohio State University
Economics 4300, Government Finance in the American
Economy
William J. White
Autumn, 2018
Second Homework Assignment
Name and Dot Number
____________________________________________
Multiple Choice Questions
30 points total
_____
1. Which if of the following describes a spillover (positive
externality)?
a) Air pollution from a factory that dirties clothes in a nearby
dry cleaner.
b) Second-hand smoke in a crowded restaurant or concert venue.
c) The knowledge passed on by students to their family and
friends.
d) The impact of one more driver on a freeway at rush hour.

2. _____ 2. Which of the following would NOT be a command-
and-control action of the
Environmental Protection agency?
a) Issuing tailpipe emission standards for passenger vehicles to
limit carbon monoxide.
b) Publishing a list of hazardous chemicals that requires
notification prior to use.
c) Requiring continuous monitoring of pollution-containing air
and water discharges.
d) Implementing a Pigovian tax on releases of sulfur dioxide
into the atmosphere.
_____
3. The Clean Air Markets program is an example of:
a) a market-based approach to eliminating pollution
externalities.
b) a command-and-control response to reduce the negative
impacts of air pollution.
c) a system by which industrial gas companies colluded to keep
their prices high.
d) yet another government program that failed to achieve its
primary objective.

3. _____ 4. The effect of a negative externality is similar to:
a) A supply curve (marginal social cost) shifting to the left.
b) A supply curve (marginal social benefit) shifting to the
right.
c) A demand curve (marginal social cost) shifting to the left.
d) A demand curve (marginal social benefit) shifting to the
right.
_____ 5. A positive externality results from the purchase of
smoke detectors. If smoke
detectors are sold in a competitive market,
a) the marginal social benefit of smoke detectors is less than
the marginal private
benefit received by any consumer.
b) the marginal social benefit will exceed the marginal private
benefit received by
any consumer.
c) in equilibrium the marginal social cost of smoke detectors
will equal the marginal social benefit.
d) in equilibrium the marginal social benefit of smoke detectors
is zero.
_____
6. The marginal external cost associated with paper production
is constant at $10 per
ton per year. The competitive market equilibrium for paper
production is currently 10
million tons per year. A corrective tax on paper production:

4. a) will collect $100 million annually.
b) will collect more than $100 million annually.
c) will collect less than $100 million annually.
d) will reduce annual damages to those other than buyers and
sellers of paper to zero.
_____ 7. Which of the following is true about command-and-
control regulation that allows
businesses to emit pollutants up to a certain point and bans
emissions after that limit
is reached?
a) They are equivalent to emissions charges.
b) They make firms pay the marginal cost of the damages done
by their emissions, no matter what the level.
c) They allow firms to emit some pollutants at zero charge.
d) They will always minimize the cost of achieving any given
reduction in emissions.
_____ 8. The Environmental Protection Agency was formed in
1970 to:
a) establish standards to describe the qualities of clean air and
water.
b) create rules for allowable pollution levels from new and
existing sources.
c) enforce environmental laws with fines and other sanctions.
d) all of the above.
_____ 9. If a government regulator forced a natural monopoly

5. firm to charge a price equal
to its marginal cost:
a) the firm would earn zero profit in equilibrium.
b) the firm's average revenue would exceed its average total
cost.
c) the firm would most likely choose to shut down.
d) all of the above are true.
_____ 10. Governments attempt to discourage or eliminate
monopolies in most industries:
a) because they charge a price that is too low versus the
competitive equilibrium.
b) in order to increase the size of the dead-weight loss
produced by monopolies.
c) because they produce a quantity that is too low versus the
competitive equilibrium.
d) all of the above.
_____ 11. Which of these markets displays aspects of first
degree price discrimination?
a) The market for college tuition.
b) The market for airline tickets.
c) The market for new automobiles.
d) all of the above.

6. _____ 12. When a firm has a natural monopoly, the firm's:
a)
marginal cost always exceeds its average total cost;
b)
total cost curve is horizontal;
c)
average total cost curve is downward sloping;
d)
marginal cost curve must lie above its average total cost curve.
_____ 13. The housing crash of 2007-2010 was caused, in
part, by these market failures:
a)
knowledge-based positive externalities.
b)
common resources subject to congestion.
c)
principal-agent type moral hazards.
d)
market destroying adverse selections.
_____ 14. How did the Affordable Care Act (ACA) attempt to
eliminate adverse selection

7. in health care insurance markets?
a)
It forced all individuals to stay in the insurance pool.
b)
It forced large companies to provide insurance for their
employees.
c)
It forced individuals to reveal information about their health
status to insurers.
d)
The ACA did not attempt to eliminate adverse selection.
_____ 15. Which of the following is not a likely result of
imperfect monitoring of agents by
their principals?
a)
incentives of agents to take excessive risks.
b)
alignment of incentives between principles and agents.
c)
incentives of agents to shirk their responsibilities.
d)
a tendency of principals to overpay their agents.
Essay Question

8. 20 points total
16. The first part of this course has been devoted to making a
case for government action in our economy by identifying
market behaviors or outcomes that lead to inefficiencies or
inequities. Please list four of the examples we have discussed,
explain why these situations may be of concern to governments,
and describe actions governments can and do take to resolve or
minimize the impact of these problematic situations.
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12. ___________________
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OR- C5
POSSIBLE CONTRIBUTION TO THEORY AND PRACTICE
Case Assignment
Please reflect on the readings for this week, your own research
topic, and the text you produced in previous courses. Based on
these elements, produce a paper which clearly states your
projects’ potential contributions for research and practice.
· Please organize your paper in a scholarly way. Add section
titles when necessary. Explain your logic and when appropriate,
use external sources and use proper citations.
· The paper is usually between 3 and 10 pages long.
Assignment Expectations
1. Write this paper with clarity, depth and critical thinking.
2. Completeness and coherence: Chain of thought is easy to

13. follow.
3. Collected relevant evidences and consulted additional
papers/resources to support the propositions.
4. Paper is clearly written with appropriate format. Reference
list is complete. Citation is properly done.
My notes: FOR THIS ASSIGNMENT:
My Hypothesis: The market demand and organizational culture
defines innovation and performance in a company
Cited sources within your comment to support your statements.
Include references, properly formatted
6pgs
Required Reading
Three journal papers in your area of research interest (e.g.,
focusing on your DV), which clearly discuss contributions to
theory and practice.
Optional Reading
Additional 3 journal papers in your area of research interest
(e.g., focusing on your DV), which clearly discuss contributions
to theory and practice.