Question 1

For both public goods and common resources, an externality arises because:

Accepted Answer

A) something of value has no price attached to it 
B) the goods are undervalued by society 
C) the social optimum level of output is greater than market equilibrium 
D) all of the above are true 
A) something of value has no price attached to it 
B) the goods are undervalued by society 
C) the social optimum level of output is greater than market equilibrium 
D) all of the above are true

Question 2

The efficient provision of public goods is difficult because:

Accepted Answer

A) governments can't directly observe users' willingness to pay for the good 
B) some users may exaggerate the benefits in a questionnaire 
C) information on costs is poor because prices aren't directly observed 
D) all of the above 
A) governments can't directly observe users' willingness to pay for the good 
B) some users may exaggerate the benefits in a questionnaire 
C) information on costs is poor because prices aren't directly observed 
D) all of the above

Question 3

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

Question 4

To determine if a good is a common resource or a public good, we need to know:

Accepted Answer

A) if the good is provided by the government 
B) if my use of the good reduces its availability to you 
C) if the good can be patented 
D) if the good is very expensive to produce 
A) if the good is provided by the government 
B) if my use of the good reduces its availability to you 
C) if the good can be patented 
D) if the good is very expensive to produce

Question 5

It is sometimes possible for households to use their neighbours' wireless internet without permission.What type of problem is encountered in this situation and what might be done about it?

Accepted Answer

A) Without a password the internet is a public good and the neighbours should impose a password to make it more like a private good 
B) Without a password the internet is a common resource and the neighbours should impose a password to make it more like a club good 
C) Without a password the internet is a common resource and the neighbours should demand the government impose a tax on wifi 
D) The neighbours should ascertain who has the property rights in order to figure out the optimal solution 
A) Without a password the internet is a public good and the neighbours should impose a password to make it more like a private good 
B) Without a password the internet is a common resource and the neighbours should impose a password to make it more like a club good 
C) Without a password the internet is a common resource and the neighbours should demand the government impose a tax on wifi 
D) The neighbours should ascertain who has the property rights in order to figure out the optimal solution

Question 6

Some villages in Papua New Guinea farm rare butterfly species for collectors.What outcome would you expect from this policy?

Accepted Answer

A) there will be less butterflies because of the Tragedy of the Commons 
B) there will be more butterflies because people have property rights to the insects 
C) there will be less butterflies because of the free-rider problem 
D) none of the above 
A) there will be less butterflies because of the Tragedy of the Commons 
B) there will be more butterflies because people have property rights to the insects 
C) there will be less butterflies because of the free-rider problem 
D) none of the above

Question 7

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 8

Provision of electricity is a natural monopoly but after a certain point it becomes a private good.

Accepted Answer

A) True 
 B)False

Question 9

Proposals to use road tolls in an effort to reduce traffic congestion are often rejected by the public because:

Accepted Answer

A) there is no longer sufficient government intervention 
B) they tax only those who chose to drive on the toll roads 
C) they allow the rich to drive more than the poor 
D) all of the above are true 
A) there is no longer sufficient government intervention 
B) they tax only those who chose to drive on the toll roads 
C) they allow the rich to drive more than the poor 
D) all of the above are true

Question 10

Cost-benefit analysis for a private good is facilitated by which of the following facts?
(i) buyers of a private good reveal the value they place on a good by the prices they are willing to pay
(ii) a private good cannot be rival
(iii) sellers of a private good are likely to purchase inputs in regulated markets
(iv) sellers of private goods reveal their costs by the prices they are willing to accept

Accepted Answer

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

Question 11

In the market for a good such as ice-cream cones:

Accepted Answer

A) an inefficient number of ice-cream cones will be produced 
B) the sum of producer surplus and consumer surplus is minimised 
C) price adjusts to balance supply and demand 
D) people's wants are not met adequately 
A) an inefficient number of ice-cream cones will be produced 
B) the sum of producer surplus and consumer surplus is minimised 
C) price adjusts to balance supply and demand 
D) people's wants are not met adequately

Question 12

The Tragedy of the Commons occurs because:

Accepted Answer

A) a common resource is under-utilised 
B) a common resource is rival in consumption 
C) crimes are committed in public places 
D) common resources are subject to exclusionary rules 
A) a common resource is under-utilised 
B) a common resource is rival in consumption 
C) crimes are committed in public places 
D) common resources are subject to exclusionary rules

Question 13

Markets may allocate natural resources wastefully if:

Accepted Answer

A) people get too greedy 
B) property rights are neither well defined nor enforced 
C) catching poachers is very easy 
D) All of the above are possible 
A) people get too greedy 
B) property rights are neither well defined nor enforced 
C) catching poachers is very easy 
D) All of the above are possible

Question 14

Assuming that everyone prefers to live in a society without poverty, which of the following statements are true of private anti-poverty programs?
(i) people who don't contribute still receive benefits from the general reduction in poverty
(ii) the socially optimal level of charitable donations is greater than those actually received, because of the free-rider problem
(iii) there is no individual incentive to contribute to private anti-poverty programs since the government is the sole supplier

Accepted Answer

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

Question 15

Many special interest groups assert that the environment should be protected irrespective of the cost.This would imply that the environment is priceless - it has infinite value.If this is true, which of the following policies would be passed by a cost-benefit analysis?

Accepted Answer

A) banning international transport by sea to protect endangered whales from fatal ship-collisions 
B) banning fishing to prevent turtles or dolphins being caught as by-catch 
C) banning wind-power plants to prevent rare birds getting killed in the blades 
D) all of the above 
A) banning international transport by sea to protect endangered whales from fatal ship-collisions 
B) banning fishing to prevent turtles or dolphins being caught as by-catch 
C) banning wind-power plants to prevent rare birds getting killed in the blades 
D) all of the above

Question 16

When an infinite value is placed on human life which of the following represents policymakers who rely on cost-benefit analysis?
(i) they are forced to pursue any project in which a single human life is saved
(ii) they are likely to make decisions that optimally allocate society's scarce resources
(iii) they are left with nonsensical results

Accepted Answer

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

Question 17

Because of the free-rider problem, respondents to cost-benefit surveys:

Accepted Answer

A) are unable to evaluate the effect of the project on their personal satisfaction. 
B) are typically not benefited directly by government projects 
C) have a difficult time identifying explicit costs 
D) have little incentive to tell the truth 
A) are unable to evaluate the effect of the project on their personal satisfaction. 
B) are typically not benefited directly by government projects 
C) have a difficult time identifying explicit costs 
D) have little incentive to tell the truth

Question 18

Government may be able to solve the problem of overuse of a common resource by:

Accepted Answer

A) regulating the use or consumption of the common resource 
B) taxing the use or consumption of the common resource 
C) selling the common resource to a private entity 
D) doing all of the above 
A) regulating the use or consumption of the common resource 
B) taxing the use or consumption of the common resource 
C) selling the common resource to a private entity 
D) doing all of the above

Question 19

Raising the living standards of the poor is a public good if people are not concerned about poverty.

Accepted Answer

A) True 
 B)False

Question 20

Basic research is a public good because it:

Accepted Answer

A) is difficult to exclude those who might benefit from it 
B) is used to develop public goods 
C) always benefits developed countries at the expense of developing countries 
D) is a rival good 
A) is difficult to exclude those who might benefit from it 
B) is used to develop public goods 
C) always benefits developed countries at the expense of developing countries 
D) is a rival good

Exam 11: Public Goods and Common Resources

For both public goods and common resources, an externality arises because:

The efficient provision of public goods is difficult because:

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

To determine if a good is a common resource or a public good, we need to know:

It is sometimes possible for households to use their neighbours' wireless internet without permission.What type of problem is encountered in this situation and what might be done about it?

Some villages in Papua New Guinea farm rare butterfly species for collectors.What outcome would you expect from this policy?

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

Provision of electricity is a natural monopoly but after a certain point it becomes a private good.

Proposals to use road tolls in an effort to reduce traffic congestion are often rejected by the public because:

In the market for a good such as ice-cream cones:

The Tragedy of the Commons occurs because:

Markets may allocate natural resources wastefully if:

Many special interest groups assert that the environment should be protected irrespective of the cost.This would imply that the environment is priceless - it has infinite value.If this is true, which of the following policies would be passed by a cost-benefit analysis?

Because of the free-rider problem, respondents to cost-benefit surveys:

Government may be able to solve the problem of overuse of a common resource by:

Raising the living standards of the poor is a public good if people are not concerned about poverty.

Basic research is a public good because it:

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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