Question 1

Even economists who advocate small government agree that

Accepted Answer

A) national defense is a public good and that the government should provide it. 
B) national defense is a common resource and that the government should provide it. 
C) national defense is a public good, but many of them believe that it should be provided by private firms rather than by the government. 
D) national defense is a common resource, but many of them believe that it should be provided by private firms rather than by the government. 
A) national defense is a public good and that the government should provide it. 
B) national defense is a common resource and that the government should provide it. 
C) national defense is a public good, but many of them believe that it should be provided by private firms rather than by the government. 
D) national defense is a common resource, but many of them believe that it should be provided by private firms rather than by the government.

Question 2

Scenario 11-3
Consider the following goods:
• a fish fillet served at a restaurant
• fish in the ocean
• exotic fish in a huge aquarium in a privately-owned building
-Refer to Scenario 11-3. Do any of these goods cause an externality? If so, which one(s)? Positive or negative? Briefly explain.

Accepted Answer

The exotic fish in the huge aquarium res

Question 3

Figure 11-1  
-Refer to Figure 11-1. A tornado siren in a small town 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 4

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 5

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. To maximize their own surplus, how many streetlights would the Greene'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 6

Nontoll roads can be either public goods or common resources, depending upon the degree of congestion.

Accepted Answer

A) True 
 B)False

Question 7

What do clean air in New York City and elephants in Africa have in common?

Accepted Answer

A) They are both common resources. 
B) They are both public goods. 
C) They are both club goods. 
D) Both are excludable. 
A) They are both common resources. 
B) They are both public goods. 
C) They are both club goods. 
D) Both are excludable.

Question 8

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 $750 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 3 ferry trips. 
B) The owner of Restaurant 2 would prefer to have 2 ferry trips. 
C) The owner of Store A would prefer to have 1 ferry trip. 
D) All of the above are correct. 
A) The owner of Restaurant 1 would prefer to have 3 ferry trips. 
B) The owner of Restaurant 2 would prefer to have 2 ferry trips. 
C) The owner of Store A would prefer to have 1 ferry trip. 
D) All of the above are correct.

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 $900. How many streetlights should the town install to maximize total surplus from the streetlights?

Accepted Answer

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

Question 10

As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because

Accepted Answer

A) patents correct for an unknown portion of the externality. 
B) benefits are hard to measure. 
C) members of Congress are often experts in the sciences. 
D) the costs always exceed the benefits. 
A) patents correct for an unknown portion of the externality. 
B) benefits are hard to measure. 
C) members of Congress are often experts in the sciences. 
D) the costs always exceed the benefits.

Question 11

Both public goods and common resources are

Accepted Answer

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

Question 12

Which of the following is not a common resource?

Accepted Answer

A) clean air 
B) clean water 
C) open grazing land 
D) national defense 
A) clean air 
B) clean water 
C) open grazing land 
D) national defense

Question 13

The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is

Accepted Answer

A) a private good. 
B) a public good. 
C) a club good. 
D) a common resource. 
A) a private good. 
B) a public good. 
C) a club good. 
D) a common resource.

Question 14

Because of the free-rider problem,

Accepted Answer

A) private markets tend to undersupply public goods. 
B) the federal government spends too many resources on national defense and not enough resources on medical research. 
C) fireworks displays have become increasingly dangerous. 
D) poverty has increased. 
A) private markets tend to undersupply public goods. 
B) the federal government spends too many resources on national defense and not enough resources on medical research. 
C) fireworks displays have become increasingly dangerous. 
D) poverty has increased.

Question 15

When good X is produced, some people benefit. A free-rider problem arises when

Accepted Answer

A) the number of people who benefit is small and it is impossible to prevent anyone from benefiting. 
B) the number of beneficiaries is small and it is possible to prevent some people from benefiting. 
C) the number of beneficiaries is large and it is impossible to prevent anyone from benefiting. 
D) the number of beneficiaries is large and it is possible to prevent some people from benefiting. 
A) the number of people who benefit is small and it is impossible to prevent anyone from benefiting. 
B) the number of beneficiaries is small and it is possible to prevent some people from benefiting. 
C) the number of beneficiaries is large and it is impossible to prevent anyone from benefiting. 
D) the number of beneficiaries is large and it is possible to prevent some people from benefiting.

Question 16

The Tragedy of the Commons occurs because

Accepted Answer

A) common resources are rival in consumption. 
B) government does not efficiently allocate society's scarce resources. 
C) people consider the value of resources in the future more than in the present. 
D) markets do not account for the presence of property rights. 
A) common resources are rival in consumption. 
B) government does not efficiently allocate society's scarce resources. 
C) people consider the value of resources in the future more than in the present. 
D) markets do not account for the presence of property rights.

Question 17

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. Which of the following statements about the aquifer is correct?

Accepted Answer

A) The aquifer is a public good which must be publicly owned to be used efficiently. 
B) The aquifer is a private good which must be privately owned to be used efficiently. 
C) The aquifer is a common resource which will be overused if no one owns it. 
D) The aquifer is a club good which should be left as it is. 
A) The aquifer is a public good which must be publicly owned to be used efficiently. 
B) The aquifer is a private good which must be privately owned to be used efficiently. 
C) The aquifer is a common resource which will be overused if no one owns it. 
D) The aquifer is a club good which should be left as it is.

Question 18

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

Accepted Answer

A) True 
 B)False

Question 19

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. How many streetlights should the town install to maximize total surplus from the streetlights?

Accepted Answer

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

Question 20

The provision of public goods gives rise to

Accepted Answer

A) positive externalities, as does the use of common resources. 
B) positive externalities, whereas the use of common resources gives rise to negative externalities. 
C) negative externalities, whereas the use of common resources gives rise to positive externalities. 
D) negative externalities, as does the use of common resources. 
A) positive externalities, as does the use of common resources. 
B) positive externalities, whereas the use of common resources gives rise to negative externalities. 
C) negative externalities, whereas the use of common resources gives rise to positive externalities. 
D) negative externalities, as does the use of common resources.

Exam 11: Public Goods and Common Resources

Even economists who advocate small government agree that

Figure 11-1 -Refer to Figure 11-1. A tornado siren in a small town is an example of the type of good represented by Box

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?

Nontoll roads can be either public goods or common resources, depending upon the degree of congestion.

What do clean air in New York City and elephants in Africa have in common?

As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because

Both public goods and common resources are

Which of the following is not a common resource?

The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is

Because of the free-rider problem,

When good X is produced, some people benefit. A free-rider problem arises when

The Tragedy of the Commons occurs because

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. Which of the following statements about the aquifer is correct?

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

The provision of public goods gives rise to

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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