Question 1

A picnic table is an example of a public good.

Accepted Answer

A) True 
 B)False  False

Question 2

Congested roads are a good example of a:

Accepted Answer

A) public good 
B) car prices that are too low 
C) common resource 
D) toll road 
A) public good 
B) car prices that are too low 
C) common resource 
D) toll road C

Question 3

Which of the following is true of environmental degradation?
(i) it is a common resource problem
(ii) it can be remedied through Pigovian taxes
(iii) it is a form of market failure
(iv) it is always best resolved by direct regulation

Accepted Answer

A) (i), (ii) and (iii) 
B) (i) and (ii) 
C) (i) and (iii) 
D) (i), (iii) and (iv) 
A) (i), (ii) and (iii) 
B) (i) and (ii) 
C) (i) and (iii) 
D) (i), (iii) and (iv) A

Question 4

It is often important in cost-benefit analysis to distinguish between non-market values and direct values attached to direct use.Why is it important to include non-market values in an analysis?

Accepted Answer

A) non-market values are easier to estimate than direct use values 
B) non-market values are more accurate than market values 
C) non-market values reflect supply and demand more accurately 
D) non-market values reflect the costs and benefits to society, not just to private individuals 
A) non-market values are easier to estimate than direct use values 
B) non-market values are more accurate than market values 
C) non-market values reflect supply and demand more accurately 
D) non-market values reflect the costs and benefits to society, not just to private individuals

Question 5

Which of the following factors are most important to the success of resource allocation policy?
(i) the policy must be well planned and well run
(ii) policymakers must have access to good information about the value of resources and how they affect economic wellbeing
(iii) policymakers must have altruistic motives for helping society

Accepted Answer

A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii) and (iii) 
A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii) and (iii)

Question 6

More roads do not solve traffic problems because they encourage people to live farther from work and thus use more road space.

Accepted Answer

A) True 
 B)False

Question 7

If a road is uncongested, then use of that road by an additional person would lead to a:

Accepted Answer

A) negative externality 
B) positive externality 
C) natural monopoly problem 
D) it would have no effect 
A) negative externality 
B) positive externality 
C) natural monopoly problem 
D) it would have no effect

Question 8

One example of private provision of a public good is:

Accepted Answer

A) everyone paying for free-to-air television through taxes 
B) everyone paying for television according to the programs they watch 
C) broadcasters showing advertisements during their programs 
D) the government requiring households to pay broadcasters a subscription 
A) everyone paying for free-to-air television through taxes 
B) everyone paying for television according to the programs they watch 
C) broadcasters showing advertisements during their programs 
D) the government requiring households to pay broadcasters a subscription

Question 9

Once it becomes obvious that a common resource is being overused:

Accepted Answer

A) market forces cause the use of the resource to shift to a sustainable level 
B) society voluntarily limits its use of the good 
C) it continues to be overused because individuals have no incentive to reduce their use of the good 
D) the good becomes a natural monopoly 
A) market forces cause the use of the resource to shift to a sustainable level 
B) society voluntarily limits its use of the good 
C) it continues to be overused because individuals have no incentive to reduce their use of the good 
D) the good becomes a natural monopoly

Question 10

If the use of a common resource is not regulated, it:

Accepted Answer

A) is a natural monopoly 
B) is a public good 
C) is a private good 
D) will be overused 
A) is a natural monopoly 
B) is a public good 
C) is a private good 
D) will be overused

Question 11

The Tragedy of the Commons occurs with whales because:

Accepted Answer

A) whales are a public good 
B) whaling is a cruel practice 
C) whalers often don't have property rights to whales 
D) the private incentives of the whalers are in line with social incentives 
A) whales are a public good 
B) whaling is a cruel practice 
C) whalers often don't have property rights to whales 
D) the private incentives of the whalers are in line with social incentives

Question 12

Andy is deciding whether to undertake some scientific research into developing a new supercomputer.He believes he can make a lot of money from his research.What are some problems he might encounter in obtaining remuneration for his work?

Accepted Answer

A) the possibility that other computer engineers might free ride off his research 
B) the government might use his supercomputer for different ends to what he was intending 
C) the supercomputer is a private good so he will have to obtain a patent for it 
D) there is not enough information to answer this question 
A) the possibility that other computer engineers might free ride off his research 
B) the government might use his supercomputer for different ends to what he was intending 
C) the supercomputer is a private good so he will have to obtain a patent for it 
D) there is not enough information to answer this question

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Nico, Mikey and Jess are on a road trip and are trying to decide how much food to take with them in the car.They decide that whoever values the food most highly will have to go and buy it for everyone before they depart.One problem with this approach is:

Accepted Answer

A) Nico, Mikey and Jess might not like the same foods 
B) all three friends might reduce the value they report that they place on the food to avoid having to buy it 
C) none of the friends can adequately report how hungry they feel before the trip 
D) the food is a common resource so they won't be able to buy an adequate quantity of it 
A) Nico, Mikey and Jess might not like the same foods 
B) all three friends might reduce the value they report that they place on the food to avoid having to buy it 
C) none of the friends can adequately report how hungry they feel before the trip 
D) the food is a common resource so they won't be able to buy an adequate quantity of it

Question 15

Countries that have completely outlawed domestic elephant hunting are finally seeing elephant populations start to rise.

Accepted Answer

A) True 
 B)False

Question 16

The fact that cows are not extinct proves that they are a common resource.

Accepted Answer

A) True 
 B)False

Question 17

The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of diet soft drinks is 0.0005.The cost of imposing a regulation that would ban this chemical is $18 million.If each person saved has a value equal to $10 million, how many people must the policy affect in order for benefits to exceed costs?

Accepted Answer

A) 3600 
B) 1800 
C) 600 
D) 100 
A) 3600 
B) 1800 
C) 600 
D) 100

Question 18

The Occupational Safety and Health Administration (OSHA) has determined that 100 workers are exposed to a hazardous chemical used in the production of diet soft drinks.The cost of imposing a regulation that would ban this chemical is $10 million.OSHA has calculated that each person saved by this regulation has a value equal to $10 million.If benefits are exactly equal to costs, what probability is OSHA using to assess the likelihood of a fatality from exposure to this chemical?

Accepted Answer

A) 0.001 
B) 0.01 
C) 0.1 
D) 1.0 
A) 0.001 
B) 0.01 
C) 0.1 
D) 1.0

Question 19

Government intervention becomes increasingly necessary to solve the problem of common resources as the population grows larger.

Accepted Answer

A) True 
 B)False

Question 20

Cost-benefit analysis can account for risk by adjusting benefits and costs by their probability of occurrence.

Accepted Answer

A) True 
 B)False

Exam 11: Public Goods and Common Resources

A picnic table is an example of a public good.

Congested roads are a good example of a:

Which of the following is true of environmental degradation? (i) it is a common resource problem (ii) it can be remedied through Pigovian taxes (iii) it is a form of market failure (iv) it is always best resolved by direct regulation

It is often important in cost-benefit analysis to distinguish between non-market values and direct values attached to direct use.Why is it important to include non-market values in an analysis?

More roads do not solve traffic problems because they encourage people to live farther from work and thus use more road space.

If a road is uncongested, then use of that road by an additional person would lead to a:

One example of private provision of a public good is:

Once it becomes obvious that a common resource is being overused:

If the use of a common resource is not regulated, it:

The Tragedy of the Commons occurs with whales because:

Andy is deciding whether to undertake some scientific research into developing a new supercomputer.He believes he can make a lot of money from his research.What are some problems he might encounter in obtaining remuneration for his work?

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

Nico, Mikey and Jess are on a road trip and are trying to decide how much food to take with them in the car.They decide that whoever values the food most highly will have to go and buy it for everyone before they depart.One problem with this approach is:

Countries that have completely outlawed domestic elephant hunting are finally seeing elephant populations start to rise.

The fact that cows are not extinct proves that they are a common resource.

Government intervention becomes increasingly necessary to solve the problem of common resources as the population grows larger.

Cost-benefit analysis can account for risk by adjusting benefits and costs by their probability of occurrence.

Ten Lessons From 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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