Cocoa farmers in the hypothetical country of Chocolattia face extreme povy(c h a)le8sn g2a tw5ro(l)c.erty, earning less than a dollar a day. D5.gra( os t8wl lny)2)hcc (aeeforestation caused by cocoa production poses environmental risks, with around 40%
of land dedicated to cocoa, resulting in the loss of native forests. Supply chain transparency is lacking, including issues of drug trafficking and child slavery.
Referring to the scenario above, which of the following statements are true?

I. The native forests are a common pool resource and the deforestation is a corresponding tragedy of the commons
II. The poverty of farmers, deforestation, drug trafficking and child slavery are all examples of market failure
III. Cocoa is a demerit good generating negative externalities of consumption

  Subsidies play a crucia u+ut)5 ju mvf/54kwlnl role in making healthcare more accessible and affordable. For example, if a country’s government enacted legislation introducing subsidies to help lower-income individuals and families afford health insurance coverage, these subsidies would expand healthcare access and reduce the uninsured rate, particularly for vulnerablmnuj4 )v5u+/k u t5wfle populations.
Subsidies are a form of government intervention designed to_____consumption of health care and health insurance because they are both examples of_____goods that generate_____externalities of consumption.

  Defense and security are both______and _____ s3k2+qu yfkzh( ,ga7g_, and are classic examples of _____goods provided by governments. Military forces protect a nation's citizens and their interests, regardle3 k,zy k2gs( hf7qu+gass of individuals' contributions to defense funding.

  Some professions and industries require .z fl ad t.)0kfdopi29individuals or businesses to obtain licens0lfpfdio. t dz9k)a 2.es or certifications to ensure they meet certain standards. For example, medical doctors must be licensed, and certain trades may require certification.
Based on the statement above, which of the following statements about these licenses or certifications is not true?

  Governments invest in the construction and maintenance of infrastructucthcu0vs90l (d/k;m(qu *rq o re such as roads, bridges, and public transportation systems. These projects improve mobility and facilitate economic activities for the entire population. For instance, the interstate highway system in the United States connects people across states and enm/lc9(0 u;c r soqq0kvu*t(dhables the efficient movement of goods and services.
Based on the scenario above, which of the following statements are true?

I. Infrastructure such as roads, bridges and public transportation systems generate positive production externalities.
II. Government investment in infrastructure projects is an example of direct provision by the public sector.
III. In the absence of government intervention, infrastructure projects are likely to be over provided by the free market.

  An insurance company offers a n za8 hyyk+x)gh-:2pvgew health insurance plan that inadvertently attracts a disproportionate number of indivi ygg:hyv+ 8)z- 2kahpxduals with pre-existing medical conditions.
This is an example of what problem associated with asymmetric information?

  Cocoa farmers in the hypothetical country of Chocolattia face e:g;+j;lj0;z v firqak xtreme poverty, earning less than a dollar a day. Deforestation caused by cocoa production poses environmental risks, with around 40% of land dedicated to cocoa, resulting in the loss of native forests. The supply chain includes issuekz v;fjr;; lj 0:giaq+s with drug trafficking and child slavery. Chocolate is a product that uses cocoa as an input.
Referring to the scenario above, which of the following forms of government intervention will not correct this market failure?

  Due to their non-excludable and w+u uxbr8heq8/ /4art non-rivalrous nature, public goods will not be provided by the free market. Therefore the goverh8 / qt8/+xa4rr wuebunment has to either directly provide those goods, or contract their provision out to the private sector.

Based on the statement above, which of the following is least likely to be true?

  
Using the diagram above, determine the equilibrium price, the socially optimum output, and the size of the negative externality.

	Equilibrium price	Socially optimum output	Size of negative externality
A.	$4	350 000 kg	$0.5
B.	$3.5	300 000 kg	$0.5
C.	$3.5	300 000 kg	$1
D.	$4	300 000 kg	$1

  
Using the diagram above, calculate the size of the welfare loss and the total cost of the subsidy that the government should provide so that the market will achieve allocative efficiency.

	Size of welfare loss	Total cost of subsidy
A.	$ 200 000	$1 400 000
B.	$ 200 000	$ 1 200 000
C.	$ 100 000	$ 1 200 000
D.	$ 100 000	$ 1 400 000

  
Using the diagram above, calculate the size of an indirect tax that would eliminate the externality, the total tax revenue that the government would collect, and the resulting equilibrium quantity after the imposition of the tax.

	Size of indirect tax per unit	Total tax revenue	Quantity bought and sold after tax
A.	$2	$ 1 400 000	700 000 unites
B.	$2	$ 1 200 000	600 000 units
C.	$1	$ 1 200 000	600 000 units
D.	$1	$ 1 400 000	700 000 units