Question 1

All of the following statements are true except ________.

Accepted Answer

A) the market price of an ITQ equals the marginal social benefit minus the marginal cost 
B) when an ITQ system is used in a fishing market, boat owners with a low marginal cost are willing and able to pay more for a quota than are boat owners with a higher marginal cost 
C) individual differences in marginal cost do not prevent an ITQ system from delivering the efficient outcome 
D) an ITQ is a production limit that is assigned to an individual who is free to transfer the quota to someone else 
E) Canada does not use ITQs 
A) the market price of an ITQ equals the marginal social benefit minus the marginal cost 
B) when an ITQ system is used in a fishing market, boat owners with a low marginal cost are willing and able to pay more for a quota than are boat owners with a higher marginal cost 
C) individual differences in marginal cost do not prevent an ITQ system from delivering the efficient outcome 
D) an ITQ is a production limit that is assigned to an individual who is free to transfer the quota to someone else 
E) Canada does not use ITQs A

Question 2

Use the figure below to answer the following questions.
   
Figure 17.2.1
-Refer to Figure 17.2.1.Curve MBA is Andrew's marginal benefit curve for a public good and curve MBB is Betty's marginal benefit curve for the same public good.If Andrew and Betty are the only two consumers in the economy,which point would be on the economy's marginal social benefit curve?

Accepted Answer

A) price of $20, quantity of 3 
B) price of $20, quantity of 4 
C) price of $10, quantity of 4 
D) price of $30, quantity of 0 
E) price of $60, quantity of 1 
A) price of $20, quantity of 3 
B) price of $20, quantity of 4 
C) price of $10, quantity of 4 
D) price of $30, quantity of 0 
E) price of $60, quantity of 1 E

Question 3

Although both cable television and air-traffic control are nonrival,they differ from each other because

Accepted Answer

A) cable television is a private good and air-traffic control is a public good. 
B) cable television is a public good and air-traffic control is a private good. 
C) cable television is nonexcludable and air-traffic control is a public good. 
D) cable television is nonexcludable and air-traffic control is excludable. 
E) cable television is excludable and air-traffic control is nonexcludable. 
A) cable television is a private good and air-traffic control is a public good. 
B) cable television is a public good and air-traffic control is a private good. 
C) cable television is nonexcludable and air-traffic control is a public good. 
D) cable television is nonexcludable and air-traffic control is excludable. 
E) cable television is excludable and air-traffic control is nonexcludable. E

Question 4

Rational ignorance suggests that a voter should stop acquiring more information about an issue when

Accepted Answer

A) the marginal benefit from acquiring the information equals zero. 
B) the total cost of acquiring the information is minimized. 
C) the total benefit from acquiring the information is maximized. 
D) the marginal cost of acquiring the information is equal to the marginal benefit derived from the information. 
E) the marginal cost of acquiring the information is greater than zero. 
A) the marginal benefit from acquiring the information equals zero. 
B) the total cost of acquiring the information is minimized. 
C) the total benefit from acquiring the information is maximized. 
D) the marginal cost of acquiring the information is equal to the marginal benefit derived from the information. 
E) the marginal cost of acquiring the information is greater than zero.

Question 5

Your city council is contemplating upgrading its traffic control system and the council believes that the bigger the computer it installs,the better job it can do.Elected officials want to install the scale of the system that will win the most votes.The city bureaucrats want to maximize the budget.Suppose that you are an economist and your job is to calculate the scale of the system that uses resources efficiently.Public choice theory predicts that the quantity chosen will result in ________.As an informed voter,you can attempt to influence the choice of the correct system by encouraging other voters to ________.

Accepted Answer

A) overprovision that maximizes the budget of the bureaucrats;vote only for officials that will provide the smaller efficient quantity 
B) overprovision that maximizes the budget of the bureaucrats;increase their income elasticity of demand for the new traffic control system 
C) the efficient quantity;decrease their income elasticity of demand for the new traffic control system 
D) the efficient quantity;increase their income elasticity of demand for the new traffic control system 
E) overprovision that minimizes the income elasticity of demand of bureaucrats;decrease their elasticity of demand for the new traffic control system 
A) overprovision that maximizes the budget of the bureaucrats;vote only for officials that will provide the smaller efficient quantity 
B) overprovision that maximizes the budget of the bureaucrats;increase their income elasticity of demand for the new traffic control system 
C) the efficient quantity;decrease their income elasticity of demand for the new traffic control system 
D) the efficient quantity;increase their income elasticity of demand for the new traffic control system 
E) overprovision that minimizes the income elasticity of demand of bureaucrats;decrease their elasticity of demand for the new traffic control system

Question 6

Rational ignorance suggests that voters will

Accepted Answer

A) understand defence technology before voting for defence policy. 
B) understand the auditing procedures of the Canada Revenue Agency before voting for tax reform. 
C) understand the chemistry of the atmosphere before voting for a clean-air act. 
D) vote without complete information on many issues. 
E) vote based on their complete trust in politicians and bureaucrats. 
A) understand defence technology before voting for defence policy. 
B) understand the auditing procedures of the Canada Revenue Agency before voting for tax reform. 
C) understand the chemistry of the atmosphere before voting for a clean-air act. 
D) vote without complete information on many issues. 
E) vote based on their complete trust in politicians and bureaucrats.

Question 7

One way to alleviate the tragedy of the commons is to

Accepted Answer

A) eliminate production quotas for using the common resource. 
B) make the resource private property. 
C) allow all individuals to use the common resource free of charge. 
D) distribute common resources among those individuals who really need the resource free of charge. 
E) set a price of $1 per unit of the common resource because it is an affordable price. 
A) eliminate production quotas for using the common resource. 
B) make the resource private property. 
C) allow all individuals to use the common resource free of charge. 
D) distribute common resources among those individuals who really need the resource free of charge. 
E) set a price of $1 per unit of the common resource because it is an affordable price.

Question 8

The "tragedy of the commons" refers to

Accepted Answer

A) the inability of lower income groups to achieve a higher level of education. 
B) the absence of incentives to prevent the overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably. 
C) the acceptance of deplorable working conditions by those who lack the human capital to obtain a better job. 
D) the tendency for bureaucrats to maximize their budget. 
E) farmers who allow their livestock to overgraze their fields. 
A) the inability of lower income groups to achieve a higher level of education. 
B) the absence of incentives to prevent the overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably. 
C) the acceptance of deplorable working conditions by those who lack the human capital to obtain a better job. 
D) the tendency for bureaucrats to maximize their budget. 
E) farmers who allow their livestock to overgraze their fields.

Question 9

Growing voter income can lead to the growth of the government sector because

Accepted Answer

A) public goods are income elastic. 
B) public goods are income inelastic. 
C) richer voters are more likely to be rationally ignorant. 
D) richer voters do not care about overprovision of government goods. 
E) none of the above. 
A) public goods are income elastic. 
B) public goods are income inelastic. 
C) richer voters are more likely to be rationally ignorant. 
D) richer voters do not care about overprovision of government goods. 
E) none of the above.

Question 10

The budget of a government department is likely to be efficient if

Accepted Answer

A) voters are well informed. 
B) there is rational voter ignorance combined with special interest lobbying. 
C) the political equilibrium can be described in terms of public choice theory. 
D) bureaucrats are rationally ignorant. 
E) there are negative externalities. 
A) voters are well informed. 
B) there is rational voter ignorance combined with special interest lobbying. 
C) the political equilibrium can be described in terms of public choice theory. 
D) bureaucrats are rationally ignorant. 
E) there are negative externalities.

Question 11

If voters are rationally ignorant,the quantity of national defence provided by the government will be

Accepted Answer

A) greater than the efficient quantity. 
B) less than the efficient quantity. 
C) the least costly quantity. 
D) the quantity that maximizes the budget of the Department of National Defence. 
E) both A and D are correct. 
A) greater than the efficient quantity. 
B) less than the efficient quantity. 
C) the least costly quantity. 
D) the quantity that maximizes the budget of the Department of National Defence. 
E) both A and D are correct.

Question 12

Use the figure below to answer the following questions.
   
Figure 17.3.1
-Figure 17.3.1 shows the marginal private cost curve,marginal social cost curve,and marginal social benefit curve for cod,a common resource.A quota that results in the common resource being used efficiently is set at

Accepted Answer

A) 0 kilograms a week. 
B) 4,000 kilograms a week. 
C) 3,000 kilograms a week. 
D) 5,000 kilograms a week. 
E) 1,000 kilograms a week. 
A) 0 kilograms a week. 
B) 4,000 kilograms a week. 
C) 3,000 kilograms a week. 
D) 5,000 kilograms a week. 
E) 1,000 kilograms a week.

Question 13

The quantity of a public good produced by private provision

Accepted Answer

A) is less than the efficient quantity. 
B) is equal to the efficient quantity. 
C) is greater than the efficient quantity. 
D) maximizes total public benefit. 
E) maximizes net public benefit. 
A) is less than the efficient quantity. 
B) is equal to the efficient quantity. 
C) is greater than the efficient quantity. 
D) maximizes total public benefit. 
E) maximizes net public benefit.

Question 14

In which of the following cases can the tragedy of the commons occur?
I.Cattle grazing on private ranches.
II.Catching lobsters off the coast of Florida.
III.Raising salmon on salmon farms.
IV) Using legal services provided by the courts.

Accepted Answer

A) I only 
B) II only 
C) II and III only 
D) I and IV only 
E) I and II only 
A) I only 
B) II only 
C) II and III only 
D) I and IV only 
E) I and II only

Question 15

When a city street is congested,it is

Accepted Answer

A) a common resource. 
B) nonrival and nonexcludable. 
C) nonrival and excludable. 
D) a private good. 
E) a public good. 
A) a common resource. 
B) nonrival and nonexcludable. 
C) nonrival and excludable. 
D) a private good. 
E) a public good.

Question 16

Common resources are overused because

Accepted Answer

A) the marginal private benefit of operating a boat is the quantity of fish a boat can catch. 
B) the social benefits outweigh the private benefits. 
C) the marginal private benefit will always exceed the marginal social cost. 
D) external costs are not considered. 
E) social costs are controlled by production quotas. 
A) the marginal private benefit of operating a boat is the quantity of fish a boat can catch. 
B) the social benefits outweigh the private benefits. 
C) the marginal private benefit will always exceed the marginal social cost. 
D) external costs are not considered. 
E) social costs are controlled by production quotas.

Question 17

In the equilibrium for a common resource with no government regulation,

Accepted Answer

A) marginal social benefit is greater than marginal social cost. 
B) marginal social benefit equals marginal social cost. 
C) marginal social benefit is less than marginal cost. 
D) marginal social benefit is greater than marginal cost. 
E) marginal social benefit equals marginal cost. 
A) marginal social benefit is greater than marginal social cost. 
B) marginal social benefit equals marginal social cost. 
C) marginal social benefit is less than marginal cost. 
D) marginal social benefit is greater than marginal cost. 
E) marginal social benefit equals marginal cost.

Question 18

Public goods are provided by government because

Accepted Answer

A) governments are more efficient than private firms at producing public goods. 
B) free-rider problems result in underproduction by private markets. 
C) people value national defence very highly. 
D) private firms will make an economic profit. 
E) private firms do not take into account the impact of external costs. 
A) governments are more efficient than private firms at producing public goods. 
B) free-rider problems result in underproduction by private markets. 
C) people value national defence very highly. 
D) private firms will make an economic profit. 
E) private firms do not take into account the impact of external costs.

Question 19

The budget of a government department is likely to increase beyond the efficient quantity if

Accepted Answer

A) voters are well informed. 
B) there is rational voter ignorance combined with special interest lobbying. 
C) the political equilibrium can be described in terms of social interest theory. 
D) bureaucrats are rationally ignorant. 
E) there are negative externalities. 
A) voters are well informed. 
B) there is rational voter ignorance combined with special interest lobbying. 
C) the political equilibrium can be described in terms of social interest theory. 
D) bureaucrats are rationally ignorant. 
E) there are negative externalities.

Question 20

Which of the following achieves the efficient use of a common resource?

Accepted Answer

A) property rights, production quotas, and individual transferable quotas 
B) property rights, individual transferable quotas, and subsidies 
C) property rights, production quotas, and subsidies 
D) individual transferable quotas and copyrights 
E) production quotas, individual transferable quotas, and copyrights 
A) property rights, production quotas, and individual transferable quotas 
B) property rights, individual transferable quotas, and subsidies 
C) property rights, production quotas, and subsidies 
D) individual transferable quotas and copyrights 
E) production quotas, individual transferable quotas, and copyrights

Exam 17: Public Goods and Common Resources

All of the following statements are true except ________.

Although both cable television and air-traffic control are nonrival,they differ from each other because

Rational ignorance suggests that a voter should stop acquiring more information about an issue when

Rational ignorance suggests that voters will

One way to alleviate the tragedy of the commons is to

The "tragedy of the commons" refers to

Growing voter income can lead to the growth of the government sector because

The budget of a government department is likely to be efficient if

If voters are rationally ignorant,the quantity of national defence provided by the government will be

Use the figure below to answer the following questions. Figure 17.3.1 -Figure 17.3.1 shows the marginal private cost curve,marginal social cost curve,and marginal social benefit curve for cod,a common resource.A quota that results in the common resource being used efficiently is set at

The quantity of a public good produced by private provision

In which of the following cases can the tragedy of the commons occur? I.Cattle grazing on private ranches. II.Catching lobsters off the coast of Florida. III.Raising salmon on salmon farms. IV) Using legal services provided by the courts.

When a city street is congested,it is

Common resources are overused because

In the equilibrium for a common resource with no government regulation,

Public goods are provided by government because

The budget of a government department is likely to increase beyond the efficient quantity if

Which of the following achieves the efficient use of a common resource?

What Is Economics?

The Economic Problem

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Elasticity

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Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

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Perfect Competition

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Monopolistic Competition

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Externalities

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

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