Question 1

A(n)_____ is excludable and rival in consumption.

Accepted Answer

A) private good 
B) artificially scarce good 
C) public good 
D) common resource 
A) private good 
B) artificially scarce good 
C) public good 
D) common resource

Question 2

The problem with common resources is similar to the problem with negative externalities because:

Accepted Answer

A) both issues deal with natural resources. 
B) the marginal social benefit of producing another unit exceeds the individual's marginal benefit. 
C) the marginal social cost of producing another unit exceeds the individual's marginal cost. 
D) the individual's marginal cost of producing another unit exceeds the individual's marginal benefit. 
A) both issues deal with natural resources. 
B) the marginal social benefit of producing another unit exceeds the individual's marginal benefit. 
C) the marginal social cost of producing another unit exceeds the individual's marginal cost. 
D) the individual's marginal cost of producing another unit exceeds the individual's marginal benefit.

Question 3

Use the following to answer question:  
-(Table: Street Cleanings)Use Table: Street Cleanings.What is the marginal social benefit for Peter and Wendy together when the number of street cleanings per month increases from 4 to 5?

Accepted Answer

A) $30 
B) $60 
C) $6 
D) $15 
A) $30 
B) $60 
C) $6 
D) $15

Question 4

A very large museum could accommodate many more visitors than it does without reducing the enjoyment of the visitors if it did not charge such a high price for admission.Visits to the museum are a(n):

Accepted Answer

A) private good. 
B) public good. 
C) common resource. 
D) artificially scarce good. 
A) private good. 
B) public good. 
C) common resource. 
D) artificially scarce good.

Question 5

When the market does NOT result in an efficient allocation of scarce resources,economists say that there has been:

Accepted Answer

A) market dropout. 
B) normative economics. 
C) market disincentives. 
D) market failure. 
A) market dropout. 
B) normative economics. 
C) market disincentives. 
D) market failure.

Question 6

Some public goods would not be provided without government intervention because the marginal cost of the good:

Accepted Answer

A) exceeds an individual's marginal benefit. 
B) is less than an individual's marginal benefit. 
C) would equal an individual's marginal benefit. 
D) would need to be maximized. 
A) exceeds an individual's marginal benefit. 
B) is less than an individual's marginal benefit. 
C) would equal an individual's marginal benefit. 
D) would need to be maximized.

Question 7

If the market supply and demand curves for a common resource include all costs and benefits to society from production and consumption,the common resource will:

Accepted Answer

A) be underused. 
B) be overused. 
C) be used at the socially optimal level. 
D) impose an external cost on society. 
A) be underused. 
B) be overused. 
C) be used at the socially optimal level. 
D) impose an external cost on society.

Question 8

A concert is excludable if the manager of the concert hall can prevent people who do not have a ticket from entering.

Accepted Answer

A) True 
 B)False

Question 9

If the marginal social benefit received from a good is equal to the marginal social cost of production:

Accepted Answer

A) an increase in production will improve society's well-being. 
B) a decrease in production will improve society's well-being. 
C) no change in production can improve society's well-being. 
D) the market is producing too much of the good. 
A) an increase in production will improve society's well-being. 
B) a decrease in production will improve society's well-being. 
C) no change in production can improve society's well-being. 
D) the market is producing too much of the good.

Question 10

Use the following to answer question:
Figure: Correcting for Market Failure  
-(Figure: Correcting for Market Failure)Use Figure: Correcting for Market Failure.There is an external cost in the market illustrated in the figure,and the two upward-sloping lines reflect private and social marginal costs.Economists argue that,in an unregulated private market,too _____ is produced.In the figure,the supply curve (S1)reflects _____ marginal cost.

Accepted Answer

A) little;private 
B) much;private 
C) much;social 
D) little;social and private 
A) little;private 
B) much;private 
C) much;social 
D) little;social and private

Question 11

Traffic congestion imposes higher costs and discomfort to residents of a city because the marginal social cost of any one individual's use of the roads is _____ the individual marginal cost.

Accepted Answer

A) less than 
B) greater than 
C) equal to 
D) irrelevant to 
A) less than 
B) greater than 
C) equal to 
D) irrelevant to

Question 12

Use the following to answer question:
Figure: Demand and Marginal Revenue  
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.To maximize profit,the producer will set a price of _____ and produce _____ upgrades.

Accepted Answer

A) $100;125,000 
B) $100;250,000 
C) $50;125,000 
D) $0;250,000 
A) $100;125,000 
B) $100;250,000 
C) $50;125,000 
D) $0;250,000

Question 13

Consider an economy with just two citizens.If Sanjay's marginal benefit from an hour of mosquito control efforts is $10 and Anjali's marginal benefit is $25,then the optimal number of hours of a public good like mosquito control occurs when the marginal cost of an additional hour of mosquito control is:

Accepted Answer

A) $25.00. 
B) $17.50. 
C) $10.00. 
D) $35.00. 
A) $25.00. 
B) $17.50. 
C) $10.00. 
D) $35.00.

Question 14

If left to the private market,the amount of police protection provided in a city would be _____ than it is now,and free riders would pay _____ for police protection.

Accepted Answer

A) more;more 
B) more;nothing 
C) less;nothing 
D) less;a higher price 
A) more;more 
B) more;nothing 
C) less;nothing 
D) less;a higher price

Question 15

Use the following to answer question:
Figure: Market Failure  
-(Figure: Market Failure)Use Figure: Market Failure.Suppose that the supply curve represents the marginal cost of providing streetlights in a neighborhood where only two people,Ann and Joe,reside.The demand curve represents the marginal benefit that Ann receives from the streetlights.Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to the vertical distance A-C.How much is Ann willing to pay for E streetlights?

Accepted Answer

A) 0 
B) A 
C) B 
D) C 
A) 0 
B) A 
C) B 
D) C

Question 16

When a good is nonexcludable:

Accepted Answer

A) consumers will pay the market price for it. 
B) producers will produce too much of it. 
C) a free-rider problem can arise. 
D) production will be efficient. 
A) consumers will pay the market price for it. 
B) producers will produce too much of it. 
C) a free-rider problem can arise. 
D) production will be efficient.

Question 17

Goods that are nonrival in consumption and nonexcludable are _____ goods.

Accepted Answer

A) common resource 
B) private 
C) public 
D) normal 
A) common resource 
B) private 
C) public 
D) normal

Question 18

Which statement is TRUE?

Accepted Answer

A) It is possible to observe how much people benefit from consuming an additional unit of a public good. 
B) It is difficult to get an accurate estimate of the marginal social benefits of public goods because individuals have an incentive to distort the truth about their willingness to pay. 
C) Individuals tend to underestimate the amount of a public good that they desire. 
D) It is straightforward to estimate the marginal social benefits of public goods. 
A) It is possible to observe how much people benefit from consuming an additional unit of a public good. 
B) It is difficult to get an accurate estimate of the marginal social benefits of public goods because individuals have an incentive to distort the truth about their willingness to pay. 
C) Individuals tend to underestimate the amount of a public good that they desire. 
D) It is straightforward to estimate the marginal social benefits of public goods.

Question 19

If the extent to which common resources (such as fish in the sea)should be used is left to the private market:

Accepted Answer

A) resource use will be efficient and will maximize social welfare. 
B) each individual will use the resource until his or her marginal benefit is equal to the marginal social cost. 
C) the marginal social cost and each individual's marginal private cost will be the same. 
D) the marginal social cost will be greater than the marginal private cost,and the resource will be overused. 
A) resource use will be efficient and will maximize social welfare. 
B) each individual will use the resource until his or her marginal benefit is equal to the marginal social cost. 
C) the marginal social cost and each individual's marginal private cost will be the same. 
D) the marginal social cost will be greater than the marginal private cost,and the resource will be overused.

Question 20

The government can intervene to achieve the socially optimal quantity of a common resource by using which approach(es)? I.assigning property rights
II.imposing a tax on usage
III.granting a limited number of tradable permits to use the good

Accepted Answer

A) I only 
B) II only 
C) I and II only 
D) I,II,and III 
A) I only 
B) II only 
C) I and II only 
D) I,II,and III

A(n)_____ is excludable and rival in consumption.

The problem with common resources is similar to the problem with negative externalities because:

Use the following to answer question: -(Table: Street Cleanings)Use Table: Street Cleanings.What is the marginal social benefit for Peter and Wendy together when the number of street cleanings per month increases from 4 to 5?

A very large museum could accommodate many more visitors than it does without reducing the enjoyment of the visitors if it did not charge such a high price for admission.Visits to the museum are a(n):

When the market does NOT result in an efficient allocation of scarce resources,economists say that there has been:

Some public goods would not be provided without government intervention because the marginal cost of the good:

If the market supply and demand curves for a common resource include all costs and benefits to society from production and consumption,the common resource will:

A concert is excludable if the manager of the concert hall can prevent people who do not have a ticket from entering.

If the marginal social benefit received from a good is equal to the marginal social cost of production:

Traffic congestion imposes higher costs and discomfort to residents of a city because the marginal social cost of any one individual's use of the roads is _____ the individual marginal cost.

If left to the private market,the amount of police protection provided in a city would be _ than it is now,and free riders would pay _ for police protection.

When a good is nonexcludable:

Goods that are nonrival in consumption and nonexcludable are _____ goods.

Which statement is TRUE?

If the extent to which common resources (such as fish in the sea)should be used is left to the private market:

The government can intervene to achieve the socially optimal quantity of a common resource by using which approach(es)? I.assigning property rights II.imposing a tax on usage III.granting a limited number of tradable permits to use the good

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Exam 17: Public Goods and Common Resources

A(n)_____ is excludable and rival in consumption.

The problem with common resources is similar to the problem with negative externalities because:

Use the following to answer question: -(Table: Street Cleanings)Use Table: Street Cleanings.What is the marginal social benefit for Peter and Wendy together when the number of street cleanings per month increases from 4 to 5?

A very large museum could accommodate many more visitors than it does without reducing the enjoyment of the visitors if it did not charge such a high price for admission.Visits to the museum are a(n):

When the market does NOT result in an efficient allocation of scarce resources,economists say that there has been:

Some public goods would not be provided without government intervention because the marginal cost of the good:

If the market supply and demand curves for a common resource include all costs and benefits to society from production and consumption,the common resource will:

A concert is excludable if the manager of the concert hall can prevent people who do not have a ticket from entering.

If the marginal social benefit received from a good is equal to the marginal social cost of production:

Traffic congestion imposes higher costs and discomfort to residents of a city because the marginal social cost of any one individual's use of the roads is _____ the individual marginal cost.

If left to the private market,the amount of police protection provided in a city would be _____ than it is now,and free riders would pay _____ for police protection.

When a good is nonexcludable:

Goods that are nonrival in consumption and nonexcludable are _____ goods.

Which statement is TRUE?

If the extent to which common resources (such as fish in the sea)should be used is left to the private market:

The government can intervene to achieve the socially optimal quantity of a common resource by using which approach(es)? I.assigning property rights II.imposing a tax on usage III.granting a limited number of tradable permits to use the good

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

If left to the private market,the amount of police protection provided in a city would be _ than it is now,and free riders would pay _ for police protection.