Question 1

What is the free-rider problem? What results from the free-rider problem? What is a solution to the free-rider problem?

Accepted Answer

The free-rider problem occurs when peopl

Question 2

Why does the existence of an external benefit lead to the production of less than the efficient quantity?

Accepted Answer

Buyers ignore the presence of an externa

Question 3

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, how many students are enrolled?

Accepted Answer

A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  4 million per year 
A)  8 million per year 
B)  12 million per year 
C)  10 million per year 
D)  4 million per year

Question 4

Why would the amount of education provided be inefficient if subsidies to education were not provided?

Accepted Answer

Private decision makers consider only pr

Question 5

Why will a private market be unable to produce the efficient quantity of public goods?

Accepted Answer

A)  because the good's marginal cost is too low 
B)  because the good is nonexcludable, so there is the free rider problem 
C)  because the good is rival, so no one will want to pay the producer for it 
D)  All of the above answers are correct. 
A)  because the good's marginal cost is too low 
B)  because the good is nonexcludable, so there is the free rider problem 
C)  because the good is rival, so no one will want to pay the producer for it 
D)  All of the above answers are correct.

Question 6

-The table above shows costs and benefits arising from college education. There is no government involvement and the schools are competitive.
a) Draw the marginal social cost, marginal private benefit, and marginal social benefit curves.
b) How many students are enrolled and what is the tuition?
c) What is the efficient level of enrollment?
d) What is the deadweight loss? Why does it arise?
e) If the government provides the efficient amount of education, how many school places does it offer and what is the tuition? Explain your answer.
f) If the government provides the efficient amount of education, of the tuition paid by a student what does the government pay and what does what a student pay?

Accepted Answer

@#IMG-DLM& a) The figure above shows the marginal

Question 7

-Tom and Jerry are the only members of society. The table above shows their marginal benefits from defense satellites, a public good. If the marginal social cost of a satellite is $54, the quantity of satellites provided by a competitive market is

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
A)  0. 
B)  1. 
C)  2. 
D)  3.

Question 8

Which of the following is the BEST example of a public good?

Accepted Answer

A)  a house 
B)  the Internet 
C)  Fourth of July fireworks 
D)  fish in the ocean 
A)  a house 
B)  the Internet 
C)  Fourth of July fireworks 
D)  fish in the ocean

Question 9

-In the above figure, the efficient amount of output is ________ units.

Accepted Answer

A)  25 
B)  50 
C)  75 
D)  100 
A)  25 
B)  50 
C)  75 
D)  100

Question 10

Katie Bobby  
-The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $175 a piece to produce, what is the efficient quantity of submarines?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 11

The economy's marginal social benefit curve for a public good is obtained by

Accepted Answer

A)  horizontally summing each individual's demand curve. 
B)  horizontally summing each individual's marginal benefit curve. 
C)  vertically summing each individual's marginal benefit curve. 
D)  averaging each individual's marginal benefit curve. 
A)  horizontally summing each individual's demand curve. 
B)  horizontally summing each individual's marginal benefit curve. 
C)  vertically summing each individual's marginal benefit curve. 
D)  averaging each individual's marginal benefit curve.

Question 12

-The above figure shows the marginal benefits and marginal costs of a college education. If a subsidy of $5,000 is paid to the colleges, then colleges charge tuition of

Accepted Answer

A)  $0. 
B)  $5,000. 
C)  $10,000. 
D)  $15,000. 
A)  $0. 
B)  $5,000. 
C)  $10,000. 
D)  $15,000.

Question 13

Government failure, when government actions lead to inefficiency, can result in either

Accepted Answer

A)  overprovision. 
B)  underprovision. 
C)  both A and B 
D)  neither A nor B 
A)  overprovision. 
B)  underprovision. 
C)  both A and B 
D)  neither A nor B

Question 14

To ensure that all families are protected from influenza, Berkeley's Public Health division is giving free flu vaccines at a Free Flu Clinic on October 28, 2010. What is NOT true about the externality that exists in this example?

Accepted Answer

A)  Marginal social cost for flu vaccines will decrease when there is a subsidy. 
B)  Marginal social benefit for flu vaccines is greater than marginal private benefit for flu vaccines. 
C)  To increase the quantity consumed of flu vaccines, there will be public provision of the flu vaccines. 
D)  Being vaccinated against the flu creates an external benefit. 
A)  Marginal social cost for flu vaccines will decrease when there is a subsidy. 
B)  Marginal social benefit for flu vaccines is greater than marginal private benefit for flu vaccines. 
C)  To increase the quantity consumed of flu vaccines, there will be public provision of the flu vaccines. 
D)  Being vaccinated against the flu creates an external benefit.

Question 15

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal external benefit per unit is

Accepted Answer

A)  zero. 
B)  $20 per unit. 
C)  $50 per unit. 
D)  $70 per unit. 
A)  zero. 
B)  $20 per unit. 
C)  $50 per unit. 
D)  $70 per unit.

Question 16

If I increase my consumption of a good and this has no impact the quantity you can consume of the same good, then this good is

Accepted Answer

A)  nonrival. 
B)  nonexclusive. 
C)  both nonrival and nonexclusive. 
D)  a free good. 
A)  nonrival. 
B)  nonexclusive. 
C)  both nonrival and nonexclusive. 
D)  a free good.

Question 17

Katie Bobby  
-The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $100 a piece to produce, what is the efficient quantity of submarines?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 18

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

Accepted Answer

A)  $20,000 per year. 
B)  $16,000 per year. 
C)  $12,000 per year. 
D)  $14,000 per year. 
A)  $20,000 per year. 
B)  $16,000 per year. 
C)  $12,000 per year. 
D)  $14,000 per year.

Question 19

Two candidates are running for election as mayors of New York City that was recently impacted by Superstorm Sandy. In their election platforms, both candidates supported spending very similar amounts on hurricane protection. This similarity is most likely the result of

Accepted Answer

A)  both candidates necessarily having the same preferences towards risk and protection. 
B)  the Principle of Minimum Differentiation. 
C)  both the candidates realize that hurricane protection is a public good. 
D)  politicians only take efficiency into account and hence all candidates will suggest the efficient outcome. 
A)  both candidates necessarily having the same preferences towards risk and protection. 
B)  the Principle of Minimum Differentiation. 
C)  both the candidates realize that hurricane protection is a public good. 
D)  politicians only take efficiency into account and hence all candidates will suggest the efficient outcome.

Question 20

When consumption of a good is nonrival and nonexcludable, the good is a

Accepted Answer

A)  public good. 
B)  private good. 
C)  mixed good. 
D)  service. 
A)  public good. 
B)  private good. 
C)  mixed good. 
D)  service.

Exam 16: Public Choices and Public Goods

What is the free-rider problem? What results from the free-rider problem? What is a solution to the free-rider problem?

Why does the existence of an external benefit lead to the production of less than the efficient quantity?

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, how many students are enrolled?

Why would the amount of education provided be inefficient if subsidies to education were not provided?

Why will a private market be unable to produce the efficient quantity of public goods?

-Tom and Jerry are the only members of society. The table above shows their marginal benefits from defense satellites, a public good. If the marginal social cost of a satellite is $54, the quantity of satellites provided by a competitive market is

Which of the following is the BEST example of a public good?

-In the above figure, the efficient amount of output is ________ units.

Katie Bobby -The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $175 a piece to produce, what is the efficient quantity of submarines?

The economy's marginal social benefit curve for a public good is obtained by

-The above figure shows the marginal benefits and marginal costs of a college education. If a subsidy of $5,000 is paid to the colleges, then colleges charge tuition of

Government failure, when government actions lead to inefficiency, can result in either

To ensure that all families are protected from influenza, Berkeley's Public Health division is giving free flu vaccines at a Free Flu Clinic on October 28, 2010. What is NOT true about the externality that exists in this example?

-In the above table, if the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal external benefit per unit is

If I increase my consumption of a good and this has no impact the quantity you can consume of the same good, then this good is

Katie Bobby -The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $100 a piece to produce, what is the efficient quantity of submarines?

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

Two candidates are running for election as mayors of New York City that was recently impacted by Superstorm Sandy. In their election platforms, both candidates supported spending very similar amounts on hurricane protection. This similarity is most likely the result of

When consumption of a good is nonrival and nonexcludable, the good is a

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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