Question 1

A free rider is a person who pays for a good but does not receive the benefit of it.

Accepted Answer

A) True 
 B)False

Question 2

Table 11-5
A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip.  
-Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000 per day and the 4 business owners have agreed to split the costs of the ferry trips equally. How many ferry trips would the owner of Store A prefer to have?

Accepted Answer

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

Question 3

Simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because

Accepted Answer

A) those who stand to gain have an incentive to tell the truth. 
B) those who stand to lose have an incentive to exaggerate their true costs. 
C) answers to the survey questions will always be downwardly biased. 
D) not everyone asked will be using the highway. 
A) those who stand to gain have an incentive to tell the truth. 
B) those who stand to lose have an incentive to exaggerate their true costs. 
C) answers to the survey questions will always be downwardly biased. 
D) not everyone asked will be using the highway.

Question 4

Table 11-5
A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip.  
-Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $500. How many ferry trips should there be to maximize the total surplus of the four business owners?

Accepted Answer

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

Question 5

A lighthouse might be considered a private good if

Accepted Answer

A) there is a second lighthouse nearby, thus preventing a monopoly. 
B) the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse. 
C) ships are able to enjoy the benefits of the lighthouse without paying for the benefit. 
D) a nearby port authority is able to avoid paying any fees to the lighthouse owner. 
A) there is a second lighthouse nearby, thus preventing a monopoly. 
B) the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse. 
C) ships are able to enjoy the benefits of the lighthouse without paying for the benefit. 
D) a nearby port authority is able to avoid paying any fees to the lighthouse owner.

Question 6

The free-rider problem

Accepted Answer

A) forces the supply of a public good to exceed its demand. 
B) results in common resources becoming club goods. 
C) explains why many local governments supply public goods. 
D) results in public goods becoming private goods. 
A) forces the supply of a public good to exceed its demand. 
B) results in common resources becoming club goods. 
C) explains why many local governments supply public goods. 
D) results in public goods becoming private goods.

Question 7

Knowledge that is patented is a

Accepted Answer

A) public good, whereas knowledge that is not patented is a common resource. 
B) private good, whereas knowledge that is not patented is a club good. 
C) common resource, whereas knowledge that is not patented is a private good. 
D) club good, whereas knowledge that is not patented is a public good. 
A) public good, whereas knowledge that is not patented is a common resource. 
B) private good, whereas knowledge that is not patented is a club good. 
C) common resource, whereas knowledge that is not patented is a private good. 
D) club good, whereas knowledge that is not patented is a public good.

Question 8

The overuse of a common resource relative to its economically efficient use is called

Accepted Answer

A) the free rider problem. 
B) the Tragedy of the Commons. 
C) a public good. 
D) cost-benefit analysis. 
A) the free rider problem. 
B) the Tragedy of the Commons. 
C) a public good. 
D) cost-benefit analysis.

Question 9

Figure 11-1  
-Refer to Figure 11-1. The box labeled D represents what type of good?

Accepted Answer

Box D repr

Question 10

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. If the residents choose to install the number of streetlights that will maximize total surplus from the streetlights, how much total surplus will the Greene family receive?

Accepted Answer

A) -$40 
B) $0 
C) $40 
D) $60 
A) -$40 
B) $0 
C) $40 
D) $60

Question 11

Table 11-3
This table describes the police protection demands for three equal sized groups of people in Safetyville. The second, third, and fourth columns show the number of person-hours of police protection per day that a group will demand for a given price (the first column).  
-Refer to Table 11-3. If the marginal cost of police protection is constant at $72 per person-hour, what is the efficient level of police protection to provide?

Accepted Answer

A) 9 person-hours 
B) 18 person-hours 
C) 39 person-hours 
D) 66 person-hours 
A) 9 person-hours 
B) 18 person-hours 
C) 39 person-hours 
D) 66 person-hours

Question 12

A good that is excludable is one that someone can be prevented from using if she did not pay for it.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A) The efficient provision of private goods is intrinsically more difficult than the efficient provision of public goods. 
B) The efficient provision of public goods is intrinsically more difficult than the efficient provision of private goods. 
C) Private markets provide quantities of public goods that exceed the socially-efficient quantities of those goods. 
D) Private decision makers utilize quantities of common resources that fall short of the socially-efficient quantities of those resources. 
A) The efficient provision of private goods is intrinsically more difficult than the efficient provision of public goods. 
B) The efficient provision of public goods is intrinsically more difficult than the efficient provision of private goods. 
C) Private markets provide quantities of public goods that exceed the socially-efficient quantities of those goods. 
D) Private decision makers utilize quantities of common resources that fall short of the socially-efficient quantities of those resources.

Question 14

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 15

To achieve the optimal provision of public goods, the

Accepted Answer

A) market should be allowed to arrive at an equilibrium without government intervention. 
B) government must limit the provision of the goods. 
C) government must tax producers of the goods. 
D) government must either provide the goods or subsidize their production. 
A) market should be allowed to arrive at an equilibrium without government intervention. 
B) government must limit the provision of the goods. 
C) government must tax producers of the goods. 
D) government must either provide the goods or subsidize their production.

Question 16

Markets may fail to allocate resources efficiently when property rights are not well established.

Accepted Answer

A) True 
 B)False

Question 17

Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk of someone dying in an accident from 5.3 percent to 2.1 percent over the life of the highway. If a human life is worth $10 million, then the project is worth doing as long as it does not cost more than

Accepted Answer

A) $53,000. 
B) $210,000. 
C) $320,000. 
D) $2.1 million. 
A) $53,000. 
B) $210,000. 
C) $320,000. 
D) $2.1 million.

Question 18

It would always be a mistake to view

Accepted Answer

A) a streetlight as a common resource. 
B) a nontoll road as a public good. 
C) the environment as a common resource. 
D) a lighthouse as a public good. 
A) a streetlight as a common resource. 
B) a nontoll road as a public good. 
C) the environment as a common resource. 
D) a lighthouse as a public good.

Question 19

Table 11-5
A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip.  
-Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000. How many ferry trips should there be to maximize the total surplus of the four business owners?

Accepted Answer

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

Question 20

Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.  
-Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Amber receive?

Accepted Answer

A) $0 
B) $26 
C) $32 
D) $56 
A) $0 
B) $26 
C) $32 
D) $56

Exam 11: Public Goods and Common Resources

A free rider is a person who pays for a good but does not receive the benefit of it.

Simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because

A lighthouse might be considered a private good if

The free-rider problem

Knowledge that is patented is a

The overuse of a common resource relative to its economically efficient use is called

Figure 11-1 -Refer to Figure 11-1. The box labeled D represents what type of good?

A good that is excludable is one that someone can be prevented from using if she did not pay for it.

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.

To achieve the optimal provision of public goods, the

Markets may fail to allocate resources efficiently when property rights are not well established.

It would always be a mistake to view

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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