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Problemset Title Introductory Text Self-Study Quiz By Elizabeth Wheaton Question 1 Which of the following is NOT one of the steps to identifying an optimal outcome? Type: Hint: Chapter 3, Normative Criteria for Decision Making: Multiple Choice Finding the Optimal Outcome Feedback for What are the three steps to finding the optimal outcome? all incorrect answers: Answer Graded As Ask all of the stakeholders what they Correct think is the optimal outcome. Feedback Correct! Discern the extent to which our institutions produce optimal outcomes and the divergences between actual and optimal outcomes. Incorrect This is the second step in identifying an optimal outcome. Identify an optimal outcome. Incorrect This is the first step in identifying an optimal outcome. Use knowledge of problems and behavioral causes as a basis for designing appropriate policy solutions. Incorrect This is the third step in identifying an optimal outcome. Question 2 Which of the following statements relating efficiency and optimality is correct? Type: Hint: Chapter 3, Normative Criteria for Decision Making: Multiple Choice Relating Optimality to Efficiency Feedback for What does it mean to maximize net benefit? all incorrect answers: Answer Graded As Feedback Efficient outcomes are always better than optimal outcomes. Incorrect What are the definitions of efficient outcome and optimal outcome? When the net benefit area is Correct Correct! maximized in an optimal outcome for public policy it is identical to maximizing economic surplus. Optimal outcomes are always better Incorrect What are the than efficient outcomes. definitions of efficient outcome and optimal outcome? It is not possible to have both an optimal outcome and an efficient outcome at the same time. Question 3 Type: Multiple Choice Incorrect What are the definitions of efficient outcome and optimal outcome? The First Equimarginal Principle ensures that ______________. Hint: Chapter 3, Normative Criteria for Decision Making: Relating Optimality to Efficiency Feedback for What is the First Equimarginal Principle? all incorrect answers: Answer Graded As Feedback resources are not wasted Incorrect This principle helps to minimize wasted resources. social cost is equal Incorrect What is the difference between cost to social benefit and marginal cost? social net benefit is maximized Correct Correct! the allocation is fair Incorrect Inefficient allocations are inferior, but cannot ensure that allocation is considered fair by all parties. Question 4 When making decisions about a potential action using a benefit-cost approach, which of following is the most correct? Type: Hint: Chapter 3, Normative Criteria for Decision Making: Multiple Choice Evaluating Predefined Options: Benefit-Cost Analysis Feedback for Rationally people make choices so that they gain more all than they lose. incorrect answers: Answer Graded As Feedback If the cost is greater than the Incorrect What do you gain from benefit (B/C<1), support the supporting an action that action. costs more than you gain from it? If B=C and B/C=0, support the action. Incorrect In this case, you neither gain nor lose from the decision. If the benefit is greater than Incorrect What do you gain from the cost (B/C>1), support the opposing an action that costs action. you less than you gain from it? If the cost is greater than the Correct benefit, find an alternative way to evaluate the action. Question 5 Type: Multiple Choice Correct! Opportunity cost _________________. Hint: Chapter 3, Normative Criteria for Decision Making: Evaluating Predefined Options: Benefit-Cost Analysis Feedback for Look up the definition for opportunity cost. all incorrect answers: Answer Graded As Feedback is the same as total willingness to pay Incorrect Total willingness to pay is found on the demand curve. is the foregone benefit you must give up to get benefits from some other choice Correct is irrelevant when making environmental decisions Incorrect Consider the different uses of an environmental resource. Correct! is the dollar cost of making a Incorrect What other costs are involved specific choice when you must make a choice between alternatives? Question 6 As a method for evaluating benefits and costs for multi-year projects, present value calculations _____________________. Type: Hint: Chapter 3, Normative Criteria for Decision Making: Multiple Choice Comparing Benefits and Costs across Time Feedback for Look at the definition of present value. all incorrect answers: Answer Graded As Feedback alleviate the need to look at benefits across different time periods Incorrect What is the role of present value in making choices? determine the discount rate of future benefits Incorrect The discount rate is a given and is used in calculating present value. determine net benefits of a project over a short period of time Incorrect What is the role of present value in making choices? generate comparable estimates Correct of net benefits that are received in different time periods Question 7 Correct! The treatment of risk in the policy process involves ______________. Hint: Chapter 3, The Treatment of Risk Type: Feedback for Look at the major dimensions of policy-making when Multiple Choice all risk is involved. incorrect answers: Answer Graded As Feedback the number of different risks involved Incorrect What other aspects affect risk? the level of risk that is acceptable Incorrect What other aspects affect risk? the total amount of risk involved Incorrect What other aspects affect risk? both scientific/descriptive and evaluative dimensions Correct Correct! Question 8 Maximizing the net benefits that can be generated by resource allocations across time leads to ________________. Type: Hint: Chapter 3, Normative Criteria for Decision Making: Multiple Choice Dynamic Efficiency Feedback for Look at the definitions of static efficiency and dynamic all efficiency. incorrect answers: Answer Graded As Feedback static efficiency Incorrect Does static efficiency deal with time? efficiency Incorrect Efficiency is another name for static efficiency. dynamic efficiency Correct Correct! effectiveness Question 9 Type: Multiple Choice Incorrect Effectiveness is the ability to bring about a desired effect, not maximizing net benefit. Each of the following supports the EPA's conclusion that pollution control generates positive net benefits EXCEPT _________________. Hint: Chapter 3, Applying the Concepts: Pollution Control Feedback for Look at the benefits and costs analyzed by the EPA over all the period of 1970-1990. incorrect answers: Answer Graded As Feedback benefits include reductions in death rates Incorrect This supports the conclusion. the costs of installing, operating, and maintaining pollution control equipment were passed on to consumers in the form of higher prices Incorrect This supports the conclusion. benefits include reductions in many lifethreatening diseases Incorrect This supports the conclusion. using the optimal policy mix created the net benefits found by the EPA's study Correct Correct! Question 10 Which of the following is an issue when calculating a benefit-cost estimation? Type: Hint: Chapter 2, Applying the Concepts: Issues in Benefit Multiple Choice Estimation Feedback for What are the issues of benefit estimation? all incorrect answers: Answer Graded As Feedback Primary versus secondary effects Incorrect This is an issue. The geographic scale at which the benefits are measured Incorrect This is an issue The non-monetary value of an action Incorrect This is an issue. All of the above are issues. Correct Correct!