11. Which of the following is an economic advantage of the subsidization of renewable power?
a. Subsidization decreases dependence on imported fuels.
b. Subsidization renders the adverse effects of traditional energy sources harmless.
c. Subsidies for renewable power plants do not affect states with budget deficits.
d. Subsidies for renewable power plants increase the tax revenue of the country substantially.
12. Supply-side subsidies include ________.
a. tax credits for households to install solar panels on rooftops
b. tax credits for businesses to purchase electric cars
c. high feed-in tariffs for power producers
d. grants for households to purchase electric cars
13. China took the lead in the production of solar panels primarily because ________.
a. labor costs in China were very low relative to that in Europe and the United States
b. the domestic demand for solar panels fell sharply
c. the price of pure silicon rose dramatically as supply caught up with demand
d. demand-side subsidization was not implemented in the United States
14. In ________, or judge-made law, the decisions made by judges serve as precedents for future
cases, and the set of precedents establishes a body of law.
a. civil law
b. common law
c. statutory law
d. canon law
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15. ________ damages are based on the opportunity cost of the next best alternative.
a. Consequential
b. Reliance
c. Liquidated
d. Primary
16. Court awards of damages take place ex post, and anticipation of those awards provides ex ante
incentives to fulfill promises, while leaving the flexibility to breach contracts when it is
efficient to do so. The parties to a contract may also write into the contract contingencies in
the event of breach. This liquidated damages approach is ex ante and is based on the principle
that ________.
a. damages are intended as penalties for particular actions
b. damages should not be limited to compensation for harm
c. more complete contracts can be more efficient
d. the misuse of a product should be anticipated in advance
17. The principal and most comprehensive source of institutional guidance on safety is the law of
________.
a. contracts
b. warranties
c. property
d. torts
18. When an entitlement is protected by ________, a person may infringe the entitlement but must
compensate its holder for the objectively assessed harm resulting from that infringement.
a. a property rule
b. a liability rule
c. a norm
d. canon law
19. The law pertaining to product safety developed from ________, which focus on economic
well-being.
a. the laws of contracts and warranties
b. the laws of property and entitlements
c. the statute of limitations
d. eminent domain
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20. ________ is/are made in writing by the producer and, as part of the sales agreement,
represent(s) obligations binding on the producer.
a. Privity of contract
b. Implicit guarantees
c. Express warranties
d. Writs of assistance
21. In most jurisdictions, products liability cases are covered by a ________, which is often 4
years.
a. statute of limitations
b. statute of autonomy
c. statute of compensation
d. statute of frauds
22. One of the reform measures proposed by the American Tort Reform Association is to have
punitive damage awards paid to the ________.
a. plaintiff
b. defendant
c. public
d. government
23. The distributive objection to products liability is that ________.
a. it is inequitable to assess damages to firms when there was nothing they could have done
to prevent the injury
b. a reduction in the liability of retailers is likely to have negative consequences for
businesses
c. the awards in many cases are too large and seem to provide a prize, as in a lottery, rather
than providing compensation for actual losses
d. the awards in cases decided on the basis of fault and negligence are mostly inadequate
24. Which of the following is a demerit of the liability system?
a. The liability system is costly to operate.
b. Punitive damages awards are largely governed by strict constitutional guidelines.
c. The insurance system prohibits firms to insure against the risks of damage awards.
d. The standard of strict liability assigns too much of the cost of injuries to consumers and
too little to firms, distorting the incentives for care.
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25. From the perspective of producers, damage awards ________.
a. facilitates the estimation of the ex post consequences of the producers’ ex ante decisions
b. are difficult to predict
c. act as prime deterrents to insurance companies that disallow producers to insure against
that risk
d. are highly predictable
