Question 1

A good is rival if:

Accepted Answer

A) one person's use of the good diminishes another person's enjoyment of it 
B) the government regulates its availability 
C) it is not a normal good 
D) people can be prevented from using it 
A) one person's use of the good diminishes another person's enjoyment of it 
B) the government regulates its availability 
C) it is not a normal good 
D) people can be prevented from using it

Question 2

A private beach is an example of:

Accepted Answer

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

Question 3

Suppose the owners of a lighthouse demand payments from a nearby port for the lighthouse service, threatening to turn off the lighthouse otherwise.The lighthouse is now closer to a private good.

Accepted Answer

A) True 
 B)False

Question 4

Market failure with common resources occurs because:

Accepted Answer

A) the government susbidises everyone's consumption of the resource 
B) it is difficult to obtain international agreements with fisheries 
C) ship captains avoid ports without lighthouses 
D) users impose a negative externality on other people who share use of the resource 
A) the government susbidises everyone's consumption of the resource 
B) it is difficult to obtain international agreements with fisheries 
C) ship captains avoid ports without lighthouses 
D) users impose a negative externality on other people who share use of the resource

Question 5

Government policy is of little use for properly allocating those goods that do not have prices attached to them.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true?

Accepted Answer

A) no single individual can eliminate poverty because the problem is so large 
B) private charities use taxes to escape the free-rider problem 
C) there would be no poverty problem if it was left up to private charity 
D) everyone agrees on what role the government should play in fighting poverty 
A) no single individual can eliminate poverty because the problem is so large 
B) private charities use taxes to escape the free-rider problem 
C) there would be no poverty problem if it was left up to private charity 
D) everyone agrees on what role the government should play in fighting poverty

Question 7

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 8

The government is deciding whether to build a new $2 billion highway from one side of the city to the other.Some business and consumer groups are questioning the value that such an expensive highway will bring to the city.The government says that it has done a cost-benefit analysis which shows that the highway will bring a slightly positive return, and therefore the highway should be built.Which of the following statements is true?

Accepted Answer

A) Cost-benefit analyses always provide an accurate valuation of a project, so the highway should be built. 
B) Cost-benefit analyses do not always reflect people's true valuation of a project, so the highway should not be built. 
C) It is not possible to put a dollar value on a highway, so the highway should be built. 
D) Cost-benefit analyses are rough approximations at best, so the highway should only be built if very strong evidence in favour is provided. 
A) Cost-benefit analyses always provide an accurate valuation of a project, so the highway should be built. 
B) Cost-benefit analyses do not always reflect people's true valuation of a project, so the highway should not be built. 
C) It is not possible to put a dollar value on a highway, so the highway should be built. 
D) Cost-benefit analyses are rough approximations at best, so the highway should only be built if very strong evidence in favour is provided.

Question 9

Explain the fundamental reason that common resources have a tendency to be exploited in private markets.

Accepted Answer

When people use the common resource, the

Question 10

Private markets ensure that the air we breathe is clean and that our country is defended against foreign aggressors.

Accepted Answer

A) True 
 B)False

Question 11

Apparently, human life does have an implicit dollar value, due to the observable fact that people take voluntary risks every day.

Accepted Answer

A) True 
 B)False

Question 12

Once a common resource is available for consumption, policymakers need to be concerned with:

Accepted Answer

A) making sure everyone gets a fair chance to consume 
B) how much is consumed 
C) creating laws that will completely forbid consumption, because the environment is priceless 
D) none of the above, because common resources are optimally provided in private markets 
A) making sure everyone gets a fair chance to consume 
B) how much is consumed 
C) creating laws that will completely forbid consumption, because the environment is priceless 
D) none of the above, because common resources are optimally provided in private markets

Question 13

Prices are the signals that guide the decisions of buyers and sellers in the markets.

Accepted Answer

A) True 
 B)False

Question 14

Markets work well for some goods but poorly for others.For which of the following goods would markets be expected to work well?

Accepted Answer

A) clean air 
B) restaurants 
C) wild elephants 
D) public healthcare 
A) clean air 
B) restaurants 
C) wild elephants 
D) public healthcare

Question 15

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

Accepted Answer

A) members of parliament are often experts in the sciences 
B) patents correct an unknown portion of the externality 
C) benefits are hard to measure 
D) all of the above are true 
A) members of parliament are often experts in the sciences 
B) patents correct an unknown portion of the externality 
C) benefits are hard to measure 
D) all of the above are true

Question 16

Unemployment benefits are an example of a private good.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

The government developed the patent system so that private inventors could make a reasonable profit from otherwise rival goods.

Accepted Answer

A) True 
 B)False

Question 20

Overuse and pollution of rivers can potentially be resolved by governments that:

Accepted Answer

A) deregulate use 
B) convert the common resource to a private good 
C) subsidise use 
D) do all of the above 
A) deregulate use 
B) convert the common resource to a private good 
C) subsidise use 
D) do all of the above

Exam 11: Public Goods and Common Resources

A good is rival if:

A private beach is an example of:

Suppose the owners of a lighthouse demand payments from a nearby port for the lighthouse service, threatening to turn off the lighthouse otherwise.The lighthouse is now closer to a private good.

Market failure with common resources occurs because:

Government policy is of little use for properly allocating those goods that do not have prices attached to them.

Which of the following statements is true?

The government provides public goods because:

Explain the fundamental reason that common resources have a tendency to be exploited in private markets.

Private markets ensure that the air we breathe is clean and that our country is defended against foreign aggressors.

Apparently, human life does have an implicit dollar value, due to the observable fact that people take voluntary risks every day.

Once a common resource is available for consumption, policymakers need to be concerned with:

Prices are the signals that guide the decisions of buyers and sellers in the markets.

Markets work well for some goods but poorly for others.For which of the following goods would markets be expected to work well?

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

Unemployment benefits are an example of a private good.

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.

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

The government developed the patent system so that private inventors could make a reasonable profit from otherwise rival goods.

Overuse and pollution of rivers can potentially be resolved by governments that:

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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