Question 1

What is the main difficulty facing cost-benefit analysts when they attempt to evaluate the worthiness of proposed public projects?

Accepted Answer

The main difficulty is that co

Question 2

The degradation of the environment from litter is a

Accepted Answer

A) a negative externality. 
B) free rider problem. 
C) Tragedy of the Commons. 
D) Both a and c are correct. 
A) a negative externality. 
B) free rider problem. 
C) Tragedy of the Commons. 
D) Both a and c are correct.

Question 3

Is a tornado siren excludable? Is it rival in consumption? How do we classify a tornado siren in terms of the four types of goods?

Accepted Answer

A tornado siren is n

Question 4

Each of the following explains why cost-benefit analysis is difficult except

Accepted Answer

A) there is no price with which to judge the value of a public good. 
B) surveys are often biased and unreliable. 
C) it is difficult to identify all factors that influence costs and benefits of public goods. 
D) government projects rarely have sufficient funding to complete them on time. 
A) there is no price with which to judge the value of a public good. 
B) surveys are often biased and unreliable. 
C) it is difficult to identify all factors that influence costs and benefits of public goods. 
D) government projects rarely have sufficient funding to complete them on time.

Question 5

Which of the following is a disadvantage of government provision of a public good?

Accepted Answer

A) The government lacks information about what people are willing to pay for the good. 
B) The government does not provide enough of any public good. 
C) The private sector can provide all public goods at a lower cost. 
D) None of the above is a disadvantage. 
A) The government lacks information about what people are willing to pay for the good. 
B) The government does not provide enough of any public good. 
C) The private sector can provide all public goods at a lower cost. 
D) None of the above is a disadvantage.

Question 6

The U.S. patent system

Accepted Answer

A) makes general knowledge excludable. 
B) makes specific, technical knowledge excludable. 
C) creates a disincentive to invent. 
D) Both a and b are correct. 
A) makes general knowledge excludable. 
B) makes specific, technical knowledge excludable. 
C) creates a disincentive to invent. 
D) Both a and b are correct.

Question 7

Which of the following is usually true about government-provided goods?

Accepted Answer

A) These goods have a zero opportunity cost. 
B) These goods are not scarce. 
C) People do not have to pay a fee to enjoy these goods. 
D) The invisible hand is at work to ensure these goods are provided in the market 
A) These goods have a zero opportunity cost. 
B) These goods are not scarce. 
C) People do not have to pay a fee to enjoy these goods. 
D) The invisible hand is at work to ensure these goods are provided in the market

Question 8

Under which of the following scenarios would a park be considered a club good?

Accepted Answer

A) Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. 
B) Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use. 
C) Visitors can enter the park free of charge and there are always plenty of empty picnic tables. 
D) Visitors can enter the park free of charge, but frequently all of the picnic tables are in use. 
A) Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. 
B) Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use. 
C) Visitors can enter the park free of charge and there are always plenty of empty picnic tables. 
D) Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.

Question 9

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 $360 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) -$80 
B) $320 
C) $360 
D) $480 
A) -$80 
B) $320 
C) $360 
D) $480

Question 10

If Dave and Jesse are the only two fishermen in town and neither is bothered by the other's fishing, the lake they fish in is not a common resource.

Accepted Answer

A) True 
 B)False

Question 11

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except

Accepted Answer

A) each person has an incentive to eat as fast as possible since their individual rate of consumption will not affect their individual cost. 
B) there is an externality associated with eating the food on the table. 
C) when one person eats, he may not take into account how his choice affects his friends. 
D) each dish would be both excludable and rival in consumption. 
A) each person has an incentive to eat as fast as possible since their individual rate of consumption will not affect their individual cost. 
B) there is an externality associated with eating the food on the table. 
C) when one person eats, he may not take into account how his choice affects his friends. 
D) each dish would be both excludable and rival in consumption.

Question 12

You and your friends watch a movie in your bedroom. For you and your friends, the enjoyment that you get from watching the movie is not rival in consumption.

Accepted Answer

A) True 
 B)False

Question 13

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. Which of the following statements is correct?

Accepted Answer

A) The owner of Restaurant 1 would prefer to have 2 ferry trips. 
B) The owner of Restaurant 2 would prefer to have 1 ferry trip. 
C) The owners of Stores A and B would prefer to have 0 trips. 
D) All of the above are correct. 
A) The owner of Restaurant 1 would prefer to have 2 ferry trips. 
B) The owner of Restaurant 2 would prefer to have 1 ferry trip. 
C) The owners of Stores A and B would prefer to have 0 trips. 
D) All of the above are correct.

Question 14

It would always be a mistake to view

Accepted Answer

A) many species of animals as common resources. 
B) a road as a public good. 
C) national defense as a common resource. 
D) a fireworks display as a public good. 
A) many species of animals as common resources. 
B) a road as a public good. 
C) national defense as a common resource. 
D) a fireworks display as a public good.

Question 15

Which of the following statements is not correct?

Accepted Answer

A) Common resources are rival in consumption but are not excludable. 
B) Uncongested toll roads are examples of club goods. 
C) When African elephants were privatized, the survival of the species deteriorated. 
D) National defense is not rival in consumption, nor is it excludable. 
A) Common resources are rival in consumption but are not excludable. 
B) Uncongested toll roads are examples of club goods. 
C) When African elephants were privatized, the survival of the species deteriorated. 
D) National defense is not rival in consumption, nor is it excludable.

Question 16

Tolls are not effective in altering people's incentives to drive during rush hour.

Accepted Answer

A) True 
 B)False

Question 17

Figure 11-1  
-Refer to Figure 11-1. A gym membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 18

Which of the following is an approach used by economists to calculate the value of a human life?

Accepted Answer

A) comparing the salaries of people who live in cities with more traffic lights to those who live in cities with fewer traffic lights 
B) comparing the wages of more risky occupations to less risky occupations 
C) comparing the costs of vehicles with safety features such as side-impact airbags to those without such safety features 
D) All of the above are correct. 
A) comparing the salaries of people who live in cities with more traffic lights to those who live in cities with fewer traffic lights 
B) comparing the wages of more risky occupations to less risky occupations 
C) comparing the costs of vehicles with safety features such as side-impact airbags to those without such safety features 
D) All of the above are correct.

Question 19

Is a congested nontoll road excludable? Is it rival in consumption? How do we classify a congested nontoll road in terms of the four types of goods?

Accepted Answer

A congested nontoll road is no

Question 20

Cost-benefit analysis is important to determine the role of government in our economy because

Accepted Answer

A) the government should provide all goods for which the benefits exceed the costs. 
B) cost-benefit analysis identifies the possible gains to society from government provision of a particular good. 
C) markets for private goods cannot effectively assign costs and benefits. 
D) cost-benefit analysis is the best tool to identify market failures. 
A) the government should provide all goods for which the benefits exceed the costs. 
B) cost-benefit analysis identifies the possible gains to society from government provision of a particular good. 
C) markets for private goods cannot effectively assign costs and benefits. 
D) cost-benefit analysis is the best tool to identify market failures.

Exam 11: Public Goods and Common Resources

What is the main difficulty facing cost-benefit analysts when they attempt to evaluate the worthiness of proposed public projects?

The degradation of the environment from litter is a

Is a tornado siren excludable? Is it rival in consumption? How do we classify a tornado siren in terms of the four types of goods?

Each of the following explains why cost-benefit analysis is difficult except

Which of the following is a disadvantage of government provision of a public good?

The U.S. patent system

Which of the following is usually true about government-provided goods?

Under which of the following scenarios would a park be considered a club good?

If Dave and Jesse are the only two fishermen in town and neither is bothered by the other's fishing, the lake they fish in is not a common resource.

You and your friends watch a movie in your bedroom. For you and your friends, the enjoyment that you get from watching the movie is not rival in consumption.

It would always be a mistake to view

Which of the following statements is not correct?

Tolls are not effective in altering people's incentives to drive during rush hour.

Figure 11-1 -Refer to Figure 11-1. A gym membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box

Which of the following is an approach used by economists to calculate the value of a human life?

Is a congested nontoll road excludable? Is it rival in consumption? How do we classify a congested nontoll road in terms of the four types of goods?

Cost-benefit analysis is important to determine the role of government in our economy because

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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