Question 1

An economy's marginal social benefit curve for a private good is obtained by summing the individual marginal

Accepted Answer

A) cost curves horizontally. 
B) cost curves vertically. 
C) benefit curves horizontally. 
D) benefit curves vertically. 
E) benefit curves diagonally. 
A) cost curves horizontally. 
B) cost curves vertically. 
C) benefit curves horizontally. 
D) benefit curves vertically. 
E) benefit curves diagonally.

Question 2

Rational ignorance suggests that a voter should stop acquiring more information about an issue when

Accepted Answer

A) the marginal benefit from acquiring the information equals zero. 
B) the total cost of acquiring the information is minimized. 
C) the total benefit from acquiring the information is maximized. 
D) the marginal cost of acquiring the information is equal to the marginal benefit derived from the information. 
E) the marginal cost of acquiring the information is greater than zero. 
A) the marginal benefit from acquiring the information equals zero. 
B) the total cost of acquiring the information is minimized. 
C) the total benefit from acquiring the information is maximized. 
D) the marginal cost of acquiring the information is equal to the marginal benefit derived from the information. 
E) the marginal cost of acquiring the information is greater than zero.

Question 3

All of the following statements are true except

Accepted Answer

A) the market price of an ITQ equals the marginal social benefit minus the marginal cost. 
B) when an ITQ system is used in a fishing market, boat owners with a low marginal cost are willing and able to pay more for a quota than are boat owners with a higher marginal cost. 
C) individual differences in marginal cost do not prevent an ITQ system from delivering the efficient outcome. 
D) an ITQ is a production limit that is assigned to an individual who is free to transfer the quota to someone else. 
E) Canada does not use ITQs. 
A) the market price of an ITQ equals the marginal social benefit minus the marginal cost. 
B) when an ITQ system is used in a fishing market, boat owners with a low marginal cost are willing and able to pay more for a quota than are boat owners with a higher marginal cost. 
C) individual differences in marginal cost do not prevent an ITQ system from delivering the efficient outcome. 
D) an ITQ is a production limit that is assigned to an individual who is free to transfer the quota to someone else. 
E) Canada does not use ITQs.

Question 4

Private goods are

Accepted Answer

A) nonrival and excludable. 
B) nonrival and nonexcludable. 
C) always produced in a non-regulated market. 
D) rival and excludable. 
E) rival and nonexcludable. 
A) nonrival and excludable. 
B) nonrival and nonexcludable. 
C) always produced in a non-regulated market. 
D) rival and excludable. 
E) rival and nonexcludable.

Question 5

Use the figure below to answer the following questions.
   
Figure 17.3.1
-Figure 17.3.1 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota that results in the common resource being used efficiently is set at

Accepted Answer

A) 0 kilograms a week. 
B) 4,000 kilograms a week. 
C) 3,000 kilograms a week. 
D) 5,000 kilograms a week. 
E) 1,000 kilograms a week. 
A) 0 kilograms a week. 
B) 4,000 kilograms a week. 
C) 3,000 kilograms a week. 
D) 5,000 kilograms a week. 
E) 1,000 kilograms a week.

Question 6

According to public choice theory, government failure occurs because

Accepted Answer

A) government officials do not listen to the pleading of special interest groups. 
B) lobbyists write legislation. 
C) government officials act in their own self-interest. 
D) voters are fully informed about the effects of policies. 
E) government cannot calculate the levels of externalities because there is no market for them. 
A) government officials do not listen to the pleading of special interest groups. 
B) lobbyists write legislation. 
C) government officials act in their own self-interest. 
D) voters are fully informed about the effects of policies. 
E) government cannot calculate the levels of externalities because there is no market for them.

Question 7

Although both cable television and air traffic control are nonrival, they differ from each other because

Accepted Answer

A) cable television is a private good and air traffic control is a public good. 
B) cable television is a public good and air traffic control is a private good. 
C) cable television is nonexcludable and air traffic control is a public good. 
D) cable television is nonexcludable and air traffic control is excludable. 
E) cable television is excludable and air traffic control is nonexcludable. 
A) cable television is a private good and air traffic control is a public good. 
B) cable television is a public good and air traffic control is a private good. 
C) cable television is nonexcludable and air traffic control is a public good. 
D) cable television is nonexcludable and air traffic control is excludable. 
E) cable television is excludable and air traffic control is nonexcludable.

Question 8

Use the table below to answer the following questions.
Table 17.2.1
  
-In Table 17.2.1, which one of the proposals will have the least support?

Accepted Answer

A) Current income distribution 
B) Proposal A 
C) Proposal B 
D) Proposal C 
E) Proposal A or C 
A) Current income distribution 
B) Proposal A 
C) Proposal B 
D) Proposal C 
E) Proposal A or C

Question 9

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

Accepted Answer

A) upward; upward 
B) upward; downward 
C) downward; upward 
D) downward; downward 
E) upward or downward; in the same direction as the marginal private cost curve 
A) upward; upward 
B) upward; downward 
C) downward; upward 
D) downward; downward 
E) upward or downward; in the same direction as the marginal private cost curve

Question 10

If the marginal social cost of producing a public good is greater than the marginal social benefit, then

Accepted Answer

A) more than the efficient quantity of the public good is being produced. 
B) less than the efficient quantity of the public good is being produced. 
C) the efficient quantity of the public good is being produced. 
D) the public good is being produced by a private firm. 
E) the public good must be a common resource. 
A) more than the efficient quantity of the public good is being produced. 
B) less than the efficient quantity of the public good is being produced. 
C) the efficient quantity of the public good is being produced. 
D) the public good is being produced by a private firm. 
E) the public good must be a common resource.

Question 11

Your city council is contemplating upgrading its traffic control system and the council believes that the bigger the computer it installs, the better job it can do. Elected officials want to install the scale of the system that will win the most votes. The city bureaucrats want to maximize the budget. Suppose that you are an economist and your job is to calculate the scale of the system that uses resources efficiently. Public choice theory predicts that the quantity chosen will result in ________. As an informed voter, you can attempt to influence the choice of the correct system by encouraging other voters to ________.

Accepted Answer

A) overprovision that maximizes the budget of the bureaucrats; vote only for officials that will provide the smaller efficient quantity 
B) overprovision that maximizes the budget of the bureaucrats; increase their income elasticity of demand for the new traffic control system 
C) the efficient quantity; decrease their income elasticity of demand for the new traffic control system 
D) the efficient quantity; increase their income elasticity of demand for the new traffic control system 
E) overprovision that minimizes the income elasticity of demand of bureaucrats; decrease their elasticity of demand for the new traffic control system 
A) overprovision that maximizes the budget of the bureaucrats; vote only for officials that will provide the smaller efficient quantity 
B) overprovision that maximizes the budget of the bureaucrats; increase their income elasticity of demand for the new traffic control system 
C) the efficient quantity; decrease their income elasticity of demand for the new traffic control system 
D) the efficient quantity; increase their income elasticity of demand for the new traffic control system 
E) overprovision that minimizes the income elasticity of demand of bureaucrats; decrease their elasticity of demand for the new traffic control system

Question 12

Use the figure below to answer the following questions.
   
Figure 17.3.2
-Figure 17.3.2 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The equilibrium in an unregulated market is

Accepted Answer

A) 0 goats. 
B) 40 goats. 
C) 50 goats. 
D) 55 goats. 
E) 35 goats. 
A) 0 goats. 
B) 40 goats. 
C) 50 goats. 
D) 55 goats. 
E) 35 goats.

Question 13

Sharing downloaded music

Accepted Answer

A) has a free-rider problem that cannot be eliminated because once music is downloaded, it is nonexcludable. 
B) has a free-rider problem that can be eliminated by charging people to download music. 
C) is a private good. 
D) does not have a free-rider problem. 
E) is a common resource. 
A) has a free-rider problem that cannot be eliminated because once music is downloaded, it is nonexcludable. 
B) has a free-rider problem that can be eliminated by charging people to download music. 
C) is a private good. 
D) does not have a free-rider problem. 
E) is a common resource.

Question 14

To attract a majority of voters, a political party will

Accepted Answer

A) aim its message at the most enthusiastic groups. 
B) aim its message at a small but loyal following. 
C) present a political package aimed at making the wealthier voters better off. 
D) present a political package aimed at making a majority of voters better off. 
E) respond strongest to the most vigorous lobbyists. 
A) aim its message at the most enthusiastic groups. 
B) aim its message at a small but loyal following. 
C) present a political package aimed at making the wealthier voters better off. 
D) present a political package aimed at making a majority of voters better off. 
E) respond strongest to the most vigorous lobbyists.

Question 15

A good that is nonrival and excludable is a

Accepted Answer

A) private good. 
B) public good. 
C) government good. 
D) natural monopoly good. 
E) common resource. 
A) private good. 
B) public good. 
C) government good. 
D) natural monopoly good. 
E) common resource.

Question 16

Cable television and air traffic control are similar to each other because both of them are

Accepted Answer

A) excludable. 
B) nonexcludable. 
C) nonrival. 
D) rival. 
E) private services. 
A) excludable. 
B) nonexcludable. 
C) nonrival. 
D) rival. 
E) private services.

Question 17

One way to alleviate the tragedy of the commons is to

Accepted Answer

A) eliminate production quotas for using the common resource. 
B) make the resource private property. 
C) allow all individuals to use the common resource free of charge. 
D) distribute common resources among those individuals who really need the resource free of charge. 
E) set a price of $1 per unit of the common resource because it is an affordable price. 
A) eliminate production quotas for using the common resource. 
B) make the resource private property. 
C) allow all individuals to use the common resource free of charge. 
D) distribute common resources among those individuals who really need the resource free of charge. 
E) set a price of $1 per unit of the common resource because it is an affordable price.

Question 18

Use the figure below to answer the following questions.
   
Figure 17.2.1
-Refer to Figure 17.2.1. Curve MBA is Andrew's marginal benefit curve for a public good and curve MBB is Betty's marginal benefit curve for the same public good. If Andrew and Betty are the only two consumers in the economy, which point would be on the economy's marginal social benefit curve?

Accepted Answer

A) price of $20, quantity of 3 
B) price of $20, quantity of 4 
C) price of $10, quantity of 4 
D) price of $30, quantity of 0 
E) price of $60, quantity of 1 
A) price of $20, quantity of 3 
B) price of $20, quantity of 4 
C) price of $10, quantity of 4 
D) price of $30, quantity of 0 
E) price of $60, quantity of 1

Question 19

In which of the following cases can the tragedy of the commons occur?
I. Cattle grazing on private ranches.
II. Catching lobsters off the coast of Florida.
III. Raising salmon on salmon farms.
IV. Using legal services provided by the courts.

Accepted Answer

A) I only 
B) II only 
C) II and III only 
D) I and IV only 
E) I and II only 
A) I only 
B) II only 
C) II and III only 
D) I and IV only 
E) I and II only

Question 20

Use the figure below to answer the following questions.
   
Figure 17.3.2
-Figure 17.3.2 shows the marginal private cost cure, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. To achieve an efficient quantity, the price of an ITQ is set at

Accepted Answer

A) $7.50 per litre of milk. 
B) $2.00 per litre of milk. 
C) $6.00 per litre of milk. 
D) $1.50 per litre of milk. 
E) $4.50 per litre of milk. 
A) $7.50 per litre of milk. 
B) $2.00 per litre of milk. 
C) $6.00 per litre of milk. 
D) $1.50 per litre of milk. 
E) $4.50 per litre of milk.

Exam 17: Public Goods and Common Resources

An economy's marginal social benefit curve for a private good is obtained by summing the individual marginal

Rational ignorance suggests that a voter should stop acquiring more information about an issue when

All of the following statements are true except

Private goods are

Use the figure below to answer the following questions. Figure 17.3.1 -Figure 17.3.1 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource. A quota that results in the common resource being used efficiently is set at

According to public choice theory, government failure occurs because

Although both cable television and air traffic control are nonrival, they differ from each other because

Use the table below to answer the following questions. Table 17.2.1 -In Table 17.2.1, which one of the proposals will have the least support?

For a common resource, the marginal private cost curve slopes ________ and the marginal social cost curve slopes ________.

If the marginal social cost of producing a public good is greater than the marginal social benefit, then

Use the figure below to answer the following questions. Figure 17.3.2 -Figure 17.3.2 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. The equilibrium in an unregulated market is

Sharing downloaded music

To attract a majority of voters, a political party will

A good that is nonrival and excludable is a

Cable television and air traffic control are similar to each other because both of them are

One way to alleviate the tragedy of the commons is to

In which of the following cases can the tragedy of the commons occur? I. Cattle grazing on private ranches. II. Catching lobsters off the coast of Florida. III. Raising salmon on salmon farms. IV. Using legal services provided by the courts.

Use the figure below to answer the following questions. Figure 17.3.2 -Figure 17.3.2 shows the marginal private cost cure, marginal social cost curve, and marginal social benefit curve for raising goats on a common pasture. To achieve an efficient quantity, the price of an ITQ is set at

What Is Economics

The Economic Problem

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Governments Actions in Markets

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Perfect Competition

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Externalities

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Money, the Price Level, and Inflation

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For a common resource, the marginal private cost curve slopes and the marginal social cost curve slopes .