Question 1

The free-rider problem with a public good leads to

Accepted Answer

A)  inefficiency if the good is provided by only private markets with no government action. 
B)  overproduction if the good is provided by private markets. 
C)  underproduction if the good is provided by the government. 
D)  None of the above answers is correct. 
A)  inefficiency if the good is provided by only private markets with no government action. 
B)  overproduction if the good is provided by private markets. 
C)  underproduction if the good is provided by the government. 
D)  None of the above answers is correct.

Question 2

An externality can be a

Accepted Answer

A)  cost or a benefit. 
B)  benefit but not a cost. 
C)  cost but not a benefit. 
D)  marginal cost but not a total cost. 
A)  cost or a benefit. 
B)  benefit but not a cost. 
C)  cost but not a benefit. 
D)  marginal cost but not a total cost.

Question 3

Which of the following illustrates the concept of external benefit?

Accepted Answer

A)  Good weather increases the size of the wheat crop. 
B)  A new pesticide increases the size of the wheat crop. 
C)  A gardener enjoys his flowers. 
D)  Neighbors enjoy a gardener's flowers. 
A)  Good weather increases the size of the wheat crop. 
B)  A new pesticide increases the size of the wheat crop. 
C)  A gardener enjoys his flowers. 
D)  Neighbors enjoy a gardener's flowers.

Question 4

-The table above provides information about the marginal private benefit of education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the market for education is competitive and unregulated, the equilibrium quantity of education will be ________ and the tuition will be ________.

Accepted Answer

A)  20,000 student-years; $20,000 
B)  40,000 student-years; $16,000 
C)  60,000 student-years; $12,000 
D)  80,000 student-years; $8,000 
A)  20,000 student-years; $20,000 
B)  40,000 student-years; $16,000 
C)  60,000 student-years; $12,000 
D)  80,000 student-years; $8,000

Question 5

If it is impossible to prevent someone from benefiting from a good regardless of whether or not the person paid for it, then the good is

Accepted Answer

A)  nonrival. 
B)  rival. 
C)  nonexcludable. 
D)  excludable. 
A)  nonrival. 
B)  rival. 
C)  nonexcludable. 
D)  excludable.

Question 6

A free rider is a person who consumes a good without paying for it.

Accepted Answer

A) True 
 B)False

Question 7

The principle of minimum differentiation suggests that competitors

Accepted Answer

A)  try to distinguish themselves by offering highly different products. 
B)  try to gain the largest market share by differentiating a popular product. 
C)  tend to make identical goods in order to appeal to the largest number of consumers. 
D)  try to decrease costs by minimizing the differences in the types of resources used. 
A)  try to distinguish themselves by offering highly different products. 
B)  try to gain the largest market share by differentiating a popular product. 
C)  tend to make identical goods in order to appeal to the largest number of consumers. 
D)  try to decrease costs by minimizing the differences in the types of resources used.

Question 8

When external benefits are present,

Accepted Answer

A)  competitive markets are efficient. 
B)  competitive markets are inefficient. 
C)  a tax is required to eliminate the inefficiency. 
D)  property rights have already been established. 
A)  competitive markets are efficient. 
B)  competitive markets are inefficient. 
C)  a tax is required to eliminate the inefficiency. 
D)  property rights have already been established.

Question 9

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then consumers will pay a price of

Accepted Answer

A)  $20 per unit. 
B)  $15 per unit. 
C)  $10 per unit. 
D)  $5 per unit. 
A)  $20 per unit. 
B)  $15 per unit. 
C)  $10 per unit. 
D)  $5 per unit.

Question 10

In the case of an external benefit generated by an activity, such as education, a private subsidy for that activity can achieve an efficient outcome.

Accepted Answer

A) True 
 B)False

Question 11

A good or service or a resource is nonexcludable if

Accepted Answer

A)  it is possible to prevent someone from enjoying its benefits. 
B)  it is not possible to prevent someone from benefiting from it. 
C)  its use by one person decreases the quantity available for someone else. 
D)  its use by one person does not decrease the quantity available for someone else. 
A)  it is possible to prevent someone from enjoying its benefits. 
B)  it is not possible to prevent someone from benefiting from it. 
C)  its use by one person decreases the quantity available for someone else. 
D)  its use by one person does not decrease the quantity available for someone else.

Question 12

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

Accepted Answer

A)  public transportation by bus 
B)  clean air 
C)  community swimming pools for which the user must pay a fee 
D)  postal services 
A)  public transportation by bus 
B)  clean air 
C)  community swimming pools for which the user must pay a fee 
D)  postal services

Question 13

-The above figure shows the marginal benefit and marginal cost curves for a public good. The quantity that has the best prospect of winning in an election by well-informed voters is

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  zero units supplied. 
A)  A. 
B)  B. 
C)  C. 
D)  zero units supplied.

Question 14

Describe some of the external benefits associated with education. What can government do to encourage production of the efficient amount of education?

Accepted Answer

External benefits to education include t

Question 15

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What subsidy per student will the college require to take in the efficient number of students?

Accepted Answer

A)  $2,400 
B)  $400 
C)  $2,800 
D)  $3,400 
A)  $2,400 
B)  $400 
C)  $2,800 
D)  $3,400

Question 16

Most governments subsidize basic education because

Accepted Answer

A)  there are external costs associated with well educated citizens. 
B)  the marginal social benefit of education is greater than the marginal private benefit. 
C)  of the existence of private schools. 
D)  None of the above answers are correct. 
A)  there are external costs associated with well educated citizens. 
B)  the marginal social benefit of education is greater than the marginal private benefit. 
C)  of the existence of private schools. 
D)  None of the above answers are correct.

Question 17

Because Jess didn't have the time to understand the issue, she did not vote on the amendment about clean energy. Jess's behavior demonstrates the economic principle of ________.

Accepted Answer

A)  diminishing marginal utility 
B)  voting preferences 
C)  rational ignorance 
D)  minimum differentiation 
A)  diminishing marginal utility 
B)  voting preferences 
C)  rational ignorance 
D)  minimum differentiation

Question 18

The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the

Accepted Answer

A)  marginal private benefit. 
B)  marginal external benefit. 
C)  marginal social benefit. 
D)  opportunity cost. 
A)  marginal private benefit. 
B)  marginal external benefit. 
C)  marginal social benefit. 
D)  opportunity cost.

Question 19

Is a sailboat purchased in Victoria, British Columbia, a private good or a public good?

Accepted Answer

The sailboat is a private good. The sail

Question 20

Why should people without children pay some tax to support local schools?

Accepted Answer

Education generates an external benefit.

Exam 16: Public Choices and Public Goods

The free-rider problem with a public good leads to

An externality can be a

Which of the following illustrates the concept of external benefit?

If it is impossible to prevent someone from benefiting from a good regardless of whether or not the person paid for it, then the good is

A free rider is a person who consumes a good without paying for it.

The principle of minimum differentiation suggests that competitors

When external benefits are present,

-In the above figure, if a subsidy is granted to producers that generates an efficient allocation of resources, then consumers will pay a price of

In the case of an external benefit generated by an activity, such as education, a private subsidy for that activity can achieve an efficient outcome.

A good or service or a resource is nonexcludable if

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

-The above figure shows the marginal benefit and marginal cost curves for a public good. The quantity that has the best prospect of winning in an election by well-informed voters is

Describe some of the external benefits associated with education. What can government do to encourage production of the efficient amount of education?

-The table above shows the marginal private benefit, marginal social benefit, and marginal cost of education at the College of Epsilon. What subsidy per student will the college require to take in the efficient number of students?

Most governments subsidize basic education because

Because Jess didn't have the time to understand the issue, she did not vote on the amendment about clean energy. Jess's behavior demonstrates the economic principle of ________.

The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the

Is a sailboat purchased in Victoria, British Columbia, a private good or a public good?

Why should people without children pay some tax to support local schools?

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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