Question 1

Efficiency in the provision of a public good is achieved when its

Accepted Answer

A)  total social benefit equals its total social cost. 
B)  average social benefit equals its average social cost. 
C)  marginal social benefit equals its marginal social cost. 
D)  marginal social benefit equals zero. 
A)  total social benefit equals its total social cost. 
B)  average social benefit equals its average social cost. 
C)  marginal social benefit equals its marginal social cost. 
D)  marginal social benefit equals zero.

Question 2

If it possible to prevent a person from enjoying the benefits of a good unless the person pays for the good, the good is

Accepted Answer

A)  rival. 
B)  excludable. 
C)  pure. 
D)  free. 
A)  rival. 
B)  excludable. 
C)  pure. 
D)  free.

Question 3

-The above figure shows the marginal benefits and marginal costs of a college education. If colleges receive a $5,000 subsidy, then enrollment equals

Accepted Answer

A)  0. 
B)  10 million. 
C)  15 million. 
D)  25 million. 
A)  0. 
B)  10 million. 
C)  15 million. 
D)  25 million.

Question 4

Because of free riders, a private, unregulated market would not produce the efficient quantity of a public good.

Accepted Answer

A) True 
 B)False

Question 5

If the consumption of a good decreases the quantity available for another person, the good is

Accepted Answer

A)  rival. 
B)  excludable. 
C)  pure. 
D)  free. 
A)  rival. 
B)  excludable. 
C)  pure. 
D)  free.

Question 6

Nonexcludability is a feature of

Accepted Answer

A)  goods but not services. 
B)  all nonrival goods. 
C)  goods with an external cost. 
D)  public goods. 
A)  goods but not services. 
B)  all nonrival goods. 
C)  goods with an external cost. 
D)  public goods.

Question 7

________ is the benefit that a consumer of a good or service receives.

Accepted Answer

A)  Marginal private benefit 
B)  Marginal external benefit 
C)  Marginal social benefit 
D)  Both answers A and B are correct. 
A)  Marginal private benefit 
B)  Marginal external benefit 
C)  Marginal social benefit 
D)  Both answers A and B are correct.

Question 8

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant.
-In the figure above, with no government involvement and if the colleges are competitive, what is the tuition?

Accepted Answer

A)  $10,000 per year 
B)  $14,000 per year 
C)  $8,000 per year 
D)  $16,000 per year 
A)  $10,000 per year 
B)  $14,000 per year 
C)  $8,000 per year 
D)  $16,000 per year

Question 9

How is the efficient quantity of public goods determined?

Accepted Answer

The efficient quantity of a public good

Question 10

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in less than the efficient quantity being produced.

Accepted Answer

A) True 
 B)False

Question 11

One way that government can encourage the production of goods or services that have external benefits is to subsidize the good or service.

Accepted Answer

A) True 
 B)False

Question 12

All of the following are devices that governments can use to achieve a more efficient allocation of resources in the presence of external benefits EXCEPT

Accepted Answer

A)  vouchers. 
B)  private subsidies. 
C)  marketable permits. 
D)  public provision. 
A)  vouchers. 
B)  private subsidies. 
C)  marketable permits. 
D)  public provision.

Question 13

Does vaccination against chicken pox have both private and external benefits?

Accepted Answer

Yes, vaccination against chicken pox has

Question 14

-Broomfield city council is deciding how many police officers the city needs. Broomfield's population is 10,000 people. The marginal cost of a police officer is $60,000 per year. The marginal benefit schedule of an average city resident from police protection is shown in the table above. Police protection is a public good. If voters in Broomfield are rationally ignorant and the police department achieves the highest attainable budget, each resident of Broomfield will pay ________ per year in taxes.

Accepted Answer

A)  $18 
B)  $36 
C)  $4 
D)  $60 
A)  $18 
B)  $36 
C)  $4 
D)  $60

Question 15

Michigan Radio is the state's most listened-to public radio service, attracting approximately 400,000 listeners each week. The on-air fundraiser, which ran during October 2010, generated over 7400 pledges from donors. The money raised helps pay for programming costs at the station, with membership support being the single largest source of income. The 392,600 listeners who did not call and donate can be classified as what?

Accepted Answer

A)  free riders 
B)  marginal beneficiaries 
C)  rival consumers 
D)  rationally ignorant 
A)  free riders 
B)  marginal beneficiaries 
C)  rival consumers 
D)  rationally ignorant

Question 16

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is

Accepted Answer

A)  12 million. 
B)  20 million. 
C)  16 million. 
D)  24 million. 
A)  12 million. 
B)  20 million. 
C)  16 million. 
D)  24 million.

Question 17

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, the amount of enrollment is

Accepted Answer

A)  efficient. 
B)  inefficient because marginal social cost exceeds marginal social benefit. 
C)  inefficient because marginal social benefit exceeds marginal social cost. 
D)  inefficient because the quantity of education demanded exceeds the quantity of education supplied. 
A)  efficient. 
B)  inefficient because marginal social cost exceeds marginal social benefit. 
C)  inefficient because marginal social benefit exceeds marginal social cost. 
D)  inefficient because the quantity of education demanded exceeds the quantity of education supplied.

Question 18

Long Beach Island, off the coast of New Jersey, is considering building a sand barrier to protect the houses on the island from future hurricanes. The marginal social benefit of the barrier is equal to the

Accepted Answer

A)  marginal private benefit of the person who benefits the most from the barrier. 
B)  marginal private benefit of the person who benefits the least from the barrier. 
C)  sum of the marginal private benefits for anyone who benefits from the barrier. 
D)  difference between the marginal private benefit of the person who benefits the most and the person who benefits the least from the barrier. 
A)  marginal private benefit of the person who benefits the most from the barrier. 
B)  marginal private benefit of the person who benefits the least from the barrier. 
C)  sum of the marginal private benefits for anyone who benefits from the barrier. 
D)  difference between the marginal private benefit of the person who benefits the most and the person who benefits the least from the barrier.

Question 19

Long Beach Island, off the coast of New Jersey, is considering building a sand barrier to protect the houses on the island from future hurricanes. For residents of Long Beach Island, this barrier system would be a

Accepted Answer

A)  private good. 
B)  natural monopoly. 
C)  common resource. 
D)  public good. 
A)  private good. 
B)  natural monopoly. 
C)  common resource. 
D)  public good.

Question 20

In which of the following markets are external benefits most likely to exist?

Accepted Answer

A)  in the market for gasoline 
B)  in the market for ball pens 
C)  in the market for flu shots 
D)  in the market for cigarettes 
A)  in the market for gasoline 
B)  in the market for ball pens 
C)  in the market for flu shots 
D)  in the market for cigarettes

Exam 16: Public Choices and Public Goods

Efficiency in the provision of a public good is achieved when its

If it possible to prevent a person from enjoying the benefits of a good unless the person pays for the good, the good is

-The above figure shows the marginal benefits and marginal costs of a college education. If colleges receive a $5,000 subsidy, then enrollment equals

Because of free riders, a private, unregulated market would not produce the efficient quantity of a public good.

If the consumption of a good decreases the quantity available for another person, the good is

Nonexcludability is a feature of

________ is the benefit that a consumer of a good or service receives.

The figure shows the supply curve (S) and the demand curve (D) for college education. The external benefit from college education is $6,000 per student per year and is constant. -In the figure above, with no government involvement and if the colleges are competitive, what is the tuition?

How is the efficient quantity of public goods determined?

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in less than the efficient quantity being produced.

One way that government can encourage the production of goods or services that have external benefits is to subsidize the good or service.

All of the following are devices that governments can use to achieve a more efficient allocation of resources in the presence of external benefits EXCEPT

Does vaccination against chicken pox have both private and external benefits?

-The table above shows the marginal costs and marginal benefits of college education. The efficient amount of enrollment is

-The table above shows the marginal costs and marginal benefits of college education. If the market for college education is perfectly competitive and unregulated, the amount of enrollment is

Long Beach Island, off the coast of New Jersey, is considering building a sand barrier to protect the houses on the island from future hurricanes. The marginal social benefit of the barrier is equal to the

Long Beach Island, off the coast of New Jersey, is considering building a sand barrier to protect the houses on the island from future hurricanes. For residents of Long Beach Island, this barrier system would be a

In which of the following markets are external benefits most likely to exist?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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