1. When the social marginal benefit curve of reduction of pollution is locally flat, which of the following generally makes sense in the presence of uncertainty about costs of reduction?                            

A. quantity interventions                          

b. price (tax) interventions                        

c. direct government provision of the product in question                         

d. None of the answers is correct.                          

E. Both a and b make equal sense; they are equivalent.

2. Suppose a company that produces chemicals disposes of PCBs (a cancer-causing toxin) into the local lake. The private costs of production are incurred by __________; the social costs of production are incurred by ____________.                        

A. the company; the company                  

B. the company; people affected by the PCBs                  

C. the company; people affected by the PCBs and the company                               

D. people affected by the PCBs; the company                 

E. people affected by the PCBs; people affected by the PCBs and the company

3. Which of the following are questions answered by public finance?                         

A. How might the government intervene in the economy?                         

B. Why do governments choose to intervene in the way they do?                          

C. What is the effect of government interventions on economic outcomes?                      

D. Both a and c are correct.                        

E. Answers a, b, and c is all correct.