Question 1

The private market would not supply the optimal amount of national defence because:

Accepted Answer

A)  private citizens don't value national defence enough to cover the cost of private provision 
B)  no-one has the right to attach a price to it and profit from its use 
C)  private suppliers are unable to produce national defence 
D)  the government would quickly take advantage of the profit opportunity and undersell to the private suppliers 
A)  private citizens don't value national defence enough to cover the cost of private provision 
B)  no-one has the right to attach a price to it and profit from its use 
C)  private suppliers are unable to produce national defence 
D)  the government would quickly take advantage of the profit opportunity and undersell to the private suppliers

Question 2

Due to the externalities associated with public goods and common resources:

Accepted Answer

A)  private markets will lead to an efficient allocation of resources 
B)  government intervention can potentially raise economic wellbeing 
C)  private markets will correct for the gain or loss to consumer surplus 
D)  all of the above are true 
A)  private markets will lead to an efficient allocation of resources 
B)  government intervention can potentially raise economic wellbeing 
C)  private markets will correct for the gain or loss to consumer surplus 
D)  all of the above are true

Question 3

Tim works for the government and is implementing a new government policy to set up spacious yoga studios at all state primary schools. The general public will be able to attend classes in the studios but Tim is still is trying to decide on a pricing structure. What pricing structure should Tim suggest the government adopt for the studios and why?

Accepted Answer

A)  participants shouldn't pay for their own class because a yoga class is a private good 
B)  participants should pay for the classes out of their taxes because yoga classes are a public good 
C)  participants shouldn't pay for their own class because a yoga class is a common resource 
D)  participants should each pay for their own class because yoga classes are excludable and rival 
A)  participants shouldn't pay for their own class because a yoga class is a private good 
B)  participants should pay for the classes out of their taxes because yoga classes are a public good 
C)  participants shouldn't pay for their own class because a yoga class is a common resource 
D)  participants should each pay for their own class because yoga classes are excludable and rival

Question 4

Some goods can switch between being public goods and private goods, depending on the circumstances.

Accepted Answer

A) True 
 B)False

Question 5

For the purpose of cost-benefit analysis, the value of a human life is sometimes calculated on the basis of:

Accepted Answer

A)  the risks that a person voluntarily exposes herself to in her job and/or recreational choices 
B)  the value of each individual's assets 
C)  an infinite value for each life 
D)  the amount of resources required to adequately sustain life 
A)  the risks that a person voluntarily exposes herself to in her job and/or recreational choices 
B)  the value of each individual's assets 
C)  an infinite value for each life 
D)  the amount of resources required to adequately sustain life

Question 6

When a good is characterised by non-excludability, it is theoretically possible for the government to:

Accepted Answer

A)  increase the wellbeing of residents by raising taxes to provide the good 
B)  eliminate the free-rider problem 
C)  reach the efficient outcome in spite of private market failure to do so 
D)  do all of the above 
A)  increase the wellbeing of residents by raising taxes to provide the good 
B)  eliminate the free-rider problem 
C)  reach the efficient outcome in spite of private market failure to do so 
D)  do all of the above

Question 7

A good solution to saving the tiger from extinction would be to:

Accepted Answer

A)  outlaw the sale of tiger bone 
B)  tax the sale of tiger hides 
C)  develop policies that make tigers more like a private good 
D)  regulate the use of traditional Asian medicines that use tiger bone 
A)  outlaw the sale of tiger bone 
B)  tax the sale of tiger hides 
C)  develop policies that make tigers more like a private good 
D)  regulate the use of traditional Asian medicines that use tiger bone

Question 8

If cutting down a native forest causes many rare animals to become extinct, a cost-benefit analysis would still class this as a cost, even if there is no market price for species survival.

Accepted Answer

A) True 
 B)False

Question 9

Government needs only to point out which goods the private markets are failing to provide efficiently and then allow the private markets to correct themselves.

Accepted Answer

A) True 
 B)False

Question 10

Cost-benefit analysis always fails to include free goods like clean air as benefits.

Accepted Answer

A) True 
 B)False

Question 11

A New Zealand private nature reserve that holds deer for tourism and hunting, has converted a common resource into a private good.

Accepted Answer

A) True 
 B)False

Question 12

Common resource goods are:

Accepted Answer

A)  rival and non-excludable 
B)  rival and excludable 
C)  non-rival and excludable 
D)  non-rival and non-excludable 
A)  rival and non-excludable 
B)  rival and excludable 
C)  non-rival and excludable 
D)  non-rival and non-excludable

Question 13

The government provides public goods because:

Accepted Answer

A)  private markets are incapable of producing public goods 
B)  markets are always better off with some government oversight 
C)  free-riders make it difficult for private markets to supply the socially optimal quantity 
D)  external benefits will occur to private producers 
A)  private markets are incapable of producing public goods 
B)  markets are always better off with some government oversight 
C)  free-riders make it difficult for private markets to supply the socially optimal quantity 
D)  external benefits will occur to private producers

Question 14

Sheep-grazing on a common land and wireless internet share a common problem. Explain what this is and what are its causes.

Accepted Answer

The common problem is free-riders. Wirel

Question 15

Only goods that are produced in markets have value to society.

Accepted Answer

A) True 
 B)False

Question 16

The government subsidises basic research in mathematics, physics, economics and other fields in order to correct for private market failure.

Accepted Answer

A) True 
 B)False

Question 17

All animals with a commercial value are protected from extinction by market forces.

Accepted Answer

A) True 
 B)False

Question 18

The efficient provision of public goods is more difficult than the efficient provision of private goods.

Accepted Answer

A) True 
 B)False

Question 19

If the government allows landowners to kill a number of tigers that roam on their property and sell their remains then:

Accepted Answer

A)  poachers will try to kill as many tigers as possible 
B)  landowners have more incentive to protect tigers on their land 
C)  landowners have more incentive to try to kill as many tigers as possible 
D)  poachers will buy land to protect the tigers 
A)  poachers will try to kill as many tigers as possible 
B)  landowners have more incentive to protect tigers on their land 
C)  landowners have more incentive to try to kill as many tigers as possible 
D)  poachers will buy land to protect the tigers

Question 20

Private market failure to optimally allocate common resources is a problem that has only become evident in the last few centuries.

Accepted Answer

A) True 
 B)False

Exam 11: Public Goods and Common Resources

The private market would not supply the optimal amount of national defence because:

Due to the externalities associated with public goods and common resources:

Some goods can switch between being public goods and private goods, depending on the circumstances.

For the purpose of cost-benefit analysis, the value of a human life is sometimes calculated on the basis of:

When a good is characterised by non-excludability, it is theoretically possible for the government to:

A good solution to saving the tiger from extinction would be to:

If cutting down a native forest causes many rare animals to become extinct, a cost-benefit analysis would still class this as a cost, even if there is no market price for species survival.

Government needs only to point out which goods the private markets are failing to provide efficiently and then allow the private markets to correct themselves.

Cost-benefit analysis always fails to include free goods like clean air as benefits.

A New Zealand private nature reserve that holds deer for tourism and hunting, has converted a common resource into a private good.

Common resource goods are:

The government provides public goods because:

Sheep-grazing on a common land and wireless internet share a common problem. Explain what this is and what are its causes.

Only goods that are produced in markets have value to society.

The government subsidises basic research in mathematics, physics, economics and other fields in order to correct for private market failure.

All animals with a commercial value are protected from extinction by market forces.

The efficient provision of public goods is more difficult than the efficient provision of private goods.

If the government allows landowners to kill a number of tigers that roam on their property and sell their remains then:

Private market failure to optimally allocate common resources is a problem that has only become evident in the last few centuries.

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 and Business Strategy

Competition Policy

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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