Question 1

National defense is a classic example of a public good because

Accepted Answer

A) there is no market for private security services. 
B) it is difficult to exclude people from receiving the benefits from national defense once it is provided. 
C) everyone agrees that some level of national defense is important, but only the government knows the optimal amount. 
D) there are no private firms willing to supply defense goods such as tanks and weapons. 
A) there is no market for private security services. 
B) it is difficult to exclude people from receiving the benefits from national defense once it is provided. 
C) everyone agrees that some level of national defense is important, but only the government knows the optimal amount. 
D) there are no private firms willing to supply defense goods such as tanks and weapons.

Question 2

Private markets usually fail to provide lighthouses because

Accepted Answer

A) lighthouses cost too much to build relative to their benefits. 
B) government intervention makes it hard for private lighthouse owners to compete in the market. 
C) ship captains have incentives to use lighthouses without paying. 
D) lighthouses are valued very little by ship captains these days. 
A) lighthouses cost too much to build relative to their benefits. 
B) government intervention makes it hard for private lighthouse owners to compete in the market. 
C) ship captains have incentives to use lighthouses without paying. 
D) lighthouses are valued very little by ship captains these days.

Question 3

Table 11-2
Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight.  
-Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost of installing the streetlights equally. To maximize their own surplus, how many streetlights would the Black's like the town to install?

Accepted Answer

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

Question 4

The provision of a public good generates a

Accepted Answer

A) positive externality, as does the use of a common resource. 
B) positive externality and the use of a common resource generates a negative externality. 
C) negative externality, as does the use of a common resource. 
D) negative externality and the use of a common resource generates a positive externality. 
A) positive externality, as does the use of a common resource. 
B) positive externality and the use of a common resource generates a negative externality. 
C) negative externality, as does the use of a common resource. 
D) negative externality and the use of a common resource generates a positive externality.

Question 5

Which of the following statements is not correct?

Accepted Answer

A) Medical research can be an example of a public good. 
B) The private market will tend to undersupply public goods. 
C) The free-rider problem occurs when a good is nonexcludable. 
D) All goods provided by the government are public goods. 
A) Medical research can be an example of a public good. 
B) The private market will tend to undersupply public goods. 
C) The free-rider problem occurs when a good is nonexcludable. 
D) All goods provided by the government are public goods.

Question 6

Table 11-4
There are four homes along Belmont Circle, which surrounds a small plot of land. The land currently has no trees, and the 4 homeowners -- Adams, Benitez, Chen, and Davis -- are considering the idea of contributing to a pool of money that will be used to plant up to 4 trees. The table represents their willingness to pay, that is, the maximum amount that each homeowner is willing to contribute toward each tree.  
-Refer to Table 11-4. Suppose the cost to plant each tree is $300. How many trees should be planted to maximize the total surplus of the four homeowners?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 7

The free-rider problem exists with

Accepted Answer

A) public transportation 
B) knowledge. 
C) online music subscriptions. 
D) All of the above are correct. 
A) public transportation 
B) knowledge. 
C) online music subscriptions. 
D) All of the above are correct.

Question 8

On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?

Accepted Answer

A) The lack of a fireworks display in Yankeeville arises because of an externality. 
B) The lack of a fireworks display in Yankeeville arises because the free-rider problem does not apply to goods such as fireworks displays. 
C) In deciding not to produce a fireworks display in Yankeeville, private individuals and private firms made decisions that were privately irrational. 
D) All of the above are correct. 
A) The lack of a fireworks display in Yankeeville arises because of an externality. 
B) The lack of a fireworks display in Yankeeville arises because the free-rider problem does not apply to goods such as fireworks displays. 
C) In deciding not to produce a fireworks display in Yankeeville, private individuals and private firms made decisions that were privately irrational. 
D) All of the above are correct.

Question 9

You and your friends eat potato chips in your bedroom. For you and your friends, the potato chips are rival in consumption.

Accepted Answer

A) True 
 B)False

Question 10

When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.

Accepted Answer

A) True 
 B)False

Question 11

When the absence of property rights causes a market failure, the government can potentially solve the problem

Accepted Answer

A) by clearly defining property rights. 
B) through regulation. 
C) by supplying the good itself. 
D) All of the above are correct. 
A) by clearly defining property rights. 
B) through regulation. 
C) by supplying the good itself. 
D) All of the above are correct.

Question 12

The Tragedy of the Commons can be corrected by

Accepted Answer

A) conducting a cost-benefit analysis. 
B) assigning property rights to individuals. 
C) providing government subsidies for the resource. 
D) making certain everyone in the economy has access to the resource. 
A) conducting a cost-benefit analysis. 
B) assigning property rights to individuals. 
C) providing government subsidies for the resource. 
D) making certain everyone in the economy has access to the resource.

Question 13

A good is excludable if

Accepted Answer

A) one person's use of the good diminishes another person's enjoyment of it. 
B) the government can regulate its availability. 
C) it is not a normal good. 
D) people can be prevented from using it. 
A) one person's use of the good diminishes another person's enjoyment of it. 
B) the government can regulate its availability. 
C) it is not a normal good. 
D) people can be prevented from using it.

Question 14

Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town meeting, several citizens proposed building a large public swimming pool in the center of town for all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth $50 to each of them. The cost to build the swimming pool is $1,000,000. Which of the following is the most efficient option?

Accepted Answer

A) The pool should be built and paid for with donations collected from residents, as these donations should more than cover the cost of the pool. 
B) The pool should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked. 
C) The pool should be built and paid for by the wealthiest ten percent of the residents. 
D) The pool should not be built because the social value does not exceed the cost. 
A) The pool should be built and paid for with donations collected from residents, as these donations should more than cover the cost of the pool. 
B) The pool should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked. 
C) The pool should be built and paid for by the wealthiest ten percent of the residents. 
D) The pool should not be built because the social value does not exceed the cost.

Question 15

The idea of requiring motorists to pay to use the busiest streets in a city

Accepted Answer

A) has been proposed by many public officials, but to date the idea never has been tried in a major city anywhere in the world. 
B) was tried in New York City in the 1990s, but the result was more - not less - congestion on busy streets, and the experiment was short-lived. 
C) reflects the fact that a congested road is a public good. 
D) reflects the fact that a congested road is a common resource. 
A) has been proposed by many public officials, but to date the idea never has been tried in a major city anywhere in the world. 
B) was tried in New York City in the 1990s, but the result was more - not less - congestion on busy streets, and the experiment was short-lived. 
C) reflects the fact that a congested road is a public good. 
D) reflects the fact that a congested road is a common resource.

Question 16

When property rights are not well established,

Accepted Answer

A) private goods become public goods. 
B) markets fail to allocate resources efficiently. 
C) the distribution of private goods is unfair. 
D) government resources are used inefficiently. 
A) private goods become public goods. 
B) markets fail to allocate resources efficiently. 
C) the distribution of private goods is unfair. 
D) government resources are used inefficiently.

Question 17

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway. Which of the following statements is correct?

Accepted Answer

A) The benefits are usually easier to measure than the costs. 
B) Because human life is priceless, any measure to increase traffic safety would generate benefits that outweigh the costs. 
C) Estimating the value of a human life is difficult but necessary to evaluate the proposal. 
D) Both a and b are correct. 
A) The benefits are usually easier to measure than the costs. 
B) Because human life is priceless, any measure to increase traffic safety would generate benefits that outweigh the costs. 
C) Estimating the value of a human life is difficult but necessary to evaluate the proposal. 
D) Both a and b are correct.

Question 18

Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that

Accepted Answer

A) international laws making it illegal to sell grizzly bear paws are likely to be very effective at eliminating these offerings at Hong Kong restaurants. 
B) higher penalties for poaching grizzly bears will prevent poachers from killing. 
C) there are likely to be very few grizzly bear poachers. 
D) allowing individuals to own and raise grizzly bears for meat would likely reduce the threat of extinction to grizzly bear populations. 
A) international laws making it illegal to sell grizzly bear paws are likely to be very effective at eliminating these offerings at Hong Kong restaurants. 
B) higher penalties for poaching grizzly bears will prevent poachers from killing. 
C) there are likely to be very few grizzly bear poachers. 
D) allowing individuals to own and raise grizzly bears for meat would likely reduce the threat of extinction to grizzly bear populations.

Question 19

Which of the following is not a characteristic of a public good?

Accepted Answer

A) It is not excludable. 
B) It is not diminished or depreciated as additional people consume the good. 
C) Its benefits cannot be withheld from anyone. 
D) Because it is a free good, there is no opportunity cost. 
A) It is not excludable. 
B) It is not diminished or depreciated as additional people consume the good. 
C) Its benefits cannot be withheld from anyone. 
D) Because it is a free good, there is no opportunity cost.

Question 20

Which of the following goods is not excludable and not rival in consumption?

Accepted Answer

A) fish in the ocean 
B) tickets to a professional basketball game 
C) a tornado siren 
D) a premium television channel 
A) fish in the ocean 
B) tickets to a professional basketball game 
C) a tornado siren 
D) a premium television channel

National defense is a classic example of a public good because

Private markets usually fail to provide lighthouses because

The provision of a public good generates a

Which of the following statements is not correct?

The free-rider problem exists with

On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?

You and your friends eat potato chips in your bedroom. For you and your friends, the potato chips are rival in consumption.

When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.

When the absence of property rights causes a market failure, the government can potentially solve the problem

The Tragedy of the Commons can be corrected by

A good is excludable if

The idea of requiring motorists to pay to use the busiest streets in a city

When property rights are not well established,

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway. Which of the following statements is correct?

Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that

Which of the following is not a characteristic of a public good?

Which of the following goods is not excludable and not rival in consumption?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

Exam 11: Public Goods and Common Resources

National defense is a classic example of a public good because

Private markets usually fail to provide lighthouses because

The provision of a public good generates a

Which of the following statements is not correct?

The free-rider problem exists with

On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?

You and your friends eat potato chips in your bedroom. For you and your friends, the potato chips are rival in consumption.

When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.

When the absence of property rights causes a market failure, the government can potentially solve the problem

The Tragedy of the Commons can be corrected by

A good is excludable if

The idea of requiring motorists to pay to use the busiest streets in a city

When property rights are not well established,

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway. Which of the following statements is correct?

Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that

Which of the following is not a characteristic of a public good?

Which of the following goods is not excludable and not rival in consumption?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters