Question 1

Jack decides to build a lighthouse close to a nearby port.If he turns the light off, ships avoid that port.Which statement is true?

Accepted Answer

A) the port owner can free-ride on the service provided by Jack 
B) the lighthouse Jack has built is more like a private good 
C) the service that Jack provides is non-excludable 
D) all of the above statements are true 
A) the port owner can free-ride on the service provided by Jack 
B) the lighthouse Jack has built is more like a private good 
C) the service that Jack provides is non-excludable 
D) all of the above statements are true

Question 2

Careers that lend substance to the approach of valuing human life by evaluating the risk that people are voluntarily willing to take and the compensation they require for those risks include:

Accepted Answer

A) actuaries 
B) construction workers on high-rise buildings 
C) neonatologists 
D) all of the above 
A) actuaries 
B) construction workers on high-rise buildings 
C) neonatologists 
D) all of the above

Question 3

Suppose fish stocks in a lake are being overfished by fishers.To reduce the overfishing problem the government could:

Accepted Answer

A) establish a tradeable, property right entitlement to the fish 
B) pay to have more fish transported to the lake 
C) increase the length of the fishing season 
D) do all of the above 
A) establish a tradeable, property right entitlement to the fish 
B) pay to have more fish transported to the lake 
C) increase the length of the fishing season 
D) do all of the above

Question 4

A policy that allows landowners to raise and kill elephants on their own properties is trying to:

Accepted Answer

A) reduce the elephant population from becoming too large 
B) regulate the elephant hunting market so that only the best quality tusks are sold to consumers 
C) make sure the common resource that is elephants continues to grow 
D) convert elephants to a private good so that wild populations do not become extinct 
A) reduce the elephant population from becoming too large 
B) regulate the elephant hunting market so that only the best quality tusks are sold to consumers 
C) make sure the common resource that is elephants continues to grow 
D) convert elephants to a private good so that wild populations do not become extinct

Question 5

Private markets usually fail to provide lighthouses because:

Accepted Answer

A) lighthouses cost too much to build, relative to their benefits 
B) government intervention makes it hard for private lighthouse owners to compete in the market 
C) ship captains have incentives to use lighthouses without paying 
D) lighthouses are valued very little by ship captains these days 
A) lighthouses cost too much to build, relative to their benefits 
B) government intervention makes it hard for private lighthouse owners to compete in the market 
C) ship captains have incentives to use lighthouses without paying 
D) lighthouses are valued very little by ship captains these days

Question 6

When private costs differ from social costs, which of the following must be present?

Accepted Answer

A) excludable resources 
B) a negative externality 
C) a natural monopoly 
D) poor profit incentive to capitalise on the resource 
A) excludable resources 
B) a negative externality 
C) a natural monopoly 
D) poor profit incentive to capitalise on the resource

Question 7

A lighthouse is typically considered a good example of a public good because:

Accepted Answer

A) the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse 
B) there is rarely another lighthouse nearby to provide competition 
C) a nearby port authority cannot avoid paying fees to the lighthouse owner 
D) all passing ships are able to enjoy the benefits of the lighthouse without paying 
A) the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse 
B) there is rarely another lighthouse nearby to provide competition 
C) a nearby port authority cannot avoid paying fees to the lighthouse owner 
D) all passing ships are able to enjoy the benefits of the lighthouse without paying

Question 8

Property rights are important to solving some of the problems of goods that the market does not provide adequately.

Accepted Answer

A) True 
 B)False

Question 9

What are two of the major difficulties of cost-benefit analysis?

Accepted Answer

People may not represent their preferenc

Question 10

Jack, Aaron and Katie have a new television, which has stopped working.For a long time, no one takes the television to be fixed.Why might this have occurred?

Accepted Answer

A) The television is considered a private good but they can't remember who it belongs to 
B) The television is considered a public good and they are each worried the others will free ride if they pay the repair fee 
C) The television is considered a common resource and they are worried it will break again from being used too much 
D) The television is considered a club good and they are worried about the negative externality from watching too much television 
A) The television is considered a private good but they can't remember who it belongs to 
B) The television is considered a public good and they are each worried the others will free ride if they pay the repair fee 
C) The television is considered a common resource and they are worried it will break again from being used too much 
D) The television is considered a club good and they are worried about the negative externality from watching too much television

Question 11

One way to eliminate the Tragedy of the Commons is to:

Accepted Answer

A) increase law enforcement in public areas 
B) limit access to the commons 
C) increase access to the commons 
D) provide more public land for recreation 
A) increase law enforcement in public areas 
B) limit access to the commons 
C) increase access to the commons 
D) provide more public land for recreation

Question 12

Pollution of water and air resources:

Accepted Answer

A) can be solved by addressing the positive externalities 
B) can be viewed as an example of a common resource problem 
C) are viewed as a bastion of efficient market processes 
D) can be solved by taxes on swine, called Pigovian taxes 
A) can be solved by addressing the positive externalities 
B) can be viewed as an example of a common resource problem 
C) are viewed as a bastion of efficient market processes 
D) can be solved by taxes on swine, called Pigovian taxes

Question 13

Clean air and clean water are both public goods.

Accepted Answer

A) True 
 B)False

Question 14

If all citizens in a certain city were given identical debit cards to pay for their use of toll roads, which of the following statements would be true if the debit cards could be sold privately from person to person?

Accepted Answer

A) this would be a very egalitarian policy 
B) this system would end up being a redistribution of income from those that drive more to those that drive less 
C) this system could potentially be a redistribution of income from the rich to the poor if the poor drive less 
D) all of the above are true 
A) this would be a very egalitarian policy 
B) this system would end up being a redistribution of income from those that drive more to those that drive less 
C) this system could potentially be a redistribution of income from the rich to the poor if the poor drive less 
D) all of the above are true

Question 15

Businesses that buy illegally harvested timber products from tropical rainforests are influenced by the external effect of their decision.

Accepted Answer

A) True 
 B)False

Question 16

Oil deposits are often considered a common resource.If this is true, then for a group of land owners over an oil pool:

Accepted Answer

A) oil pools are an excludable good 
B) each land owner has an incentive to extract as much oil as they can, without considering the effect on other land-owners 
C) oil extraction should be subsidised 
D) all of the above are true 
A) oil pools are an excludable good 
B) each land owner has an incentive to extract as much oil as they can, without considering the effect on other land-owners 
C) oil extraction should be subsidised 
D) all of the above are true

Question 17

Give an example of a common resource you have encountered.What do common resources and public goods have in common?

Accepted Answer

Both public goods an

Question 18

If it is common knowledge that a given national park has become overused, why might raising the entrance fee to the park NOT solve the problem of overcrowding?

Accepted Answer

A) no-one would go to the park if the fees were increased 
B) additional revenue from the higher fee might not be used for the betterment of the park 
C) the lower usage might more than offset the higher entrance fees, resulting in a loss of revenue 
D) after they have spent their time and money in travelling to the park, people might not be discouraged from visiting the park by a higher entrance fee 
A) no-one would go to the park if the fees were increased 
B) additional revenue from the higher fee might not be used for the betterment of the park 
C) the lower usage might more than offset the higher entrance fees, resulting in a loss of revenue 
D) after they have spent their time and money in travelling to the park, people might not be discouraged from visiting the park by a higher entrance fee

Question 19

Jack criticises the idea of road tolls to fix congestion problems because he says they would allow the rich to drive more than the poor.You counter-argue by saying that road tolls could potentially address these equity issues and offer even an egalitarian solution.You propose to Jack that each automobile owner be given a specified debit card balance every year and that those who are willing to drive less can sell their unused balance to those who want to drive more.Jack likes your proposal, especially because of the manner in which your plan redistributes income.What groups of people might benefit from this implicit redistribution of income?

Accepted Answer

The plan will give those who are willing

Question 20

An easy solution to the problem of excessive fishing is prevented because:
(i) many countries have access to the oceans so any solution would require international cooperation
(ii) fishing rights are only assigned by the UN and the process to obtain them is very long
(iii) the oceans are very vast and it is thus very difficult to enforce an agreement

Accepted Answer

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

Exam 11: Public Goods and Common Resources

Jack decides to build a lighthouse close to a nearby port.If he turns the light off, ships avoid that port.Which statement is true?

Careers that lend substance to the approach of valuing human life by evaluating the risk that people are voluntarily willing to take and the compensation they require for those risks include:

Suppose fish stocks in a lake are being overfished by fishers.To reduce the overfishing problem the government could:

A policy that allows landowners to raise and kill elephants on their own properties is trying to:

Private markets usually fail to provide lighthouses because:

When private costs differ from social costs, which of the following must be present?

A lighthouse is typically considered a good example of a public good because:

Property rights are important to solving some of the problems of goods that the market does not provide adequately.

What are two of the major difficulties of cost-benefit analysis?

Jack, Aaron and Katie have a new television, which has stopped working.For a long time, no one takes the television to be fixed.Why might this have occurred?

One way to eliminate the Tragedy of the Commons is to:

Pollution of water and air resources:

Clean air and clean water are both public goods.

If all citizens in a certain city were given identical debit cards to pay for their use of toll roads, which of the following statements would be true if the debit cards could be sold privately from person to person?

Businesses that buy illegally harvested timber products from tropical rainforests are influenced by the external effect of their decision.

Oil deposits are often considered a common resource.If this is true, then for a group of land owners over an oil pool:

Give an example of a common resource you have encountered.What do common resources and public goods have in common?

If it is common knowledge that a given national park has become overused, why might raising the entrance fee to the park NOT solve the problem of overcrowding?

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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