Question 1

Sheep-grazing on a common land and wireless internet share a common problem. Explain what this is and what are its causes.

Accepted Answer

The common problem is free-riders. Wirel

Question 2

It is often important in Cost-benefit analysis to distinguish between non-market values and direct values attached to direct use. Which statements about non-market values are true?

Accepted Answer

A)  non-market values are easier to estimate than direct use values 
B)  non-market values have no relevance for estimating benefits 
C)  non-market values only apply to wildlife 
D)  none of the above 
A)  non-market values are easier to estimate than direct use values 
B)  non-market values have no relevance for estimating benefits 
C)  non-market values only apply to wildlife 
D)  none of the above

Question 3

When a good does not have a price attached to it, private markets:

Accepted Answer

A)  can sometimes be improved by the government 
B)  cannot ensure that the good is produced and consumed in the proper amounts 
C)  are characterised by market failure 
D)  all of the above are true 
A)  can sometimes be improved by the government 
B)  cannot ensure that the good is produced and consumed in the proper amounts 
C)  are characterised by market failure 
D)  all of the above are true

Question 4

Why is cost-benefit analysis such a difficult job? (i) there is no price with which to judge the value of a public good
(ii) surveys are often biased and unreliable
(iii) it is difficult to identify all factors that influence costs and benefits of public goods

Accepted Answer

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

Question 5

Four friends who love to ski decide to pool their financial resources and equally share the cost of a one-week timeshare unit in the Blue Mountains of New South Wales. Unfortunately the unit does not come with maid service. Everyone values clean dishes, but the fact that unwashed dishes pile up in the sink would best be explained by an economist who understands that clean dishes in the cupboard reflect:

Accepted Answer

A)  a common resource problem 
B)  a problem similar to cost-benefit analysis for public projects 
C)  a corollary to the existence value of snow at the ski resort 
D)  household behaviour of the 'invisible hand' 
A)  a common resource problem 
B)  a problem similar to cost-benefit analysis for public projects 
C)  a corollary to the existence value of snow at the ski resort 
D)  household behaviour of the 'invisible hand'

Question 6

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item from the menu and they will share all dishes. When the final bill for the meal comes, they decide they will split the cost evenly among each of the people at the table. When the food is delivered to the table, each person faces incentives similar to those associated with:

Accepted Answer

A)  consumption of a common resource good 
B)  production of a public good 
C)  consumption of a natural monopoly good 
D)  production of a private good 
A)  consumption of a common resource good 
B)  production of a public good 
C)  consumption of a natural monopoly good 
D)  production of a private good

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

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 9

Market failure associated with the free-rider problem is a result of:

Accepted Answer

A)  a problem associated with pollution 
B)  benefits that accrue to those who don't pay 
C)  losses that accrue to providers of the product 
D)  a project in which costs exceed benefits 
A)  a problem associated with pollution 
B)  benefits that accrue to those who don't pay 
C)  losses that accrue to providers of the product 
D)  a project in which costs exceed benefits

Question 10

A town engineer comes to the town council with a proposal to build a traffic light at a certain intersection that currently has a stop sign. The benefit of the traffic light is increased safety. In fact, the traffic light will reduce the incidence of fatal traffic accidents by 50 per cent per year. Which of the following statements is true?

Accepted Answer

A)  the project should definitely be accepted 
B)  the full cost of the stop light will be relatively small since it only includes the purchase and installation costs 
C)  the decision to install the light is likely to require a complex evaluation of the trade-off between the worth of human life and the lost time waiting for the light to change signals 
D)  the cost will invariably outweigh the benefit 
A)  the project should definitely be accepted 
B)  the full cost of the stop light will be relatively small since it only includes the purchase and installation costs 
C)  the decision to install the light is likely to require a complex evaluation of the trade-off between the worth of human life and the lost time waiting for the light to change signals 
D)  the cost will invariably outweigh the benefit

Question 11

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 12

Private ownership of a common resource works well when the resource is scarce.

Accepted Answer

A) True 
 B)False

Question 13

In our economy, government agencies determine the prices of most goods traded between buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 14

When a good is excludable but not rival, it is an example of a:

Accepted Answer

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

Question 15

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

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Advocates of anti-poverty programs argue that private charity is not enough to fight poverty because of the free-rider problem.

Accepted Answer

A) True 
 B)False

Question 18

Profit-seeking firms will devote little effort to develop general knowledge as:

Accepted Answer

A)  they prefer to develop specific technological knowledge 
B)  patents are too expensive to obtain 
C)  government agencies won't subsidise the research 
D)  all of the above 
A)  they prefer to develop specific technological knowledge 
B)  patents are too expensive to obtain 
C)  government agencies won't subsidise the research 
D)  all of the above

Question 19

Explain the differences between public goods and private goods.

Accepted Answer

Private goods are ex

Question 20

Do cost-benefit analysts need to attach a dollar value to human life when increased safety is a benefit of a proposed project?

Accepted Answer

The benefit received from savi

Exam 11: Public Goods and Common Resources

Sheep-grazing on a common land and wireless internet share a common problem. Explain what this is and what are its causes.

It is often important in Cost-benefit analysis to distinguish between non-market values and direct values attached to direct use. Which statements about non-market values are true?

When a good does not have a price attached to it, private markets:

Why is cost-benefit analysis such a difficult job? (i) there is no price with which to judge the value of a public good (ii) surveys are often biased and unreliable (iii) it is difficult to identify all factors that influence costs and benefits of public goods

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

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?

Market failure associated with the free-rider problem is a result of:

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

Private ownership of a common resource works well when the resource is scarce.

In our economy, government agencies determine the prices of most goods traded between buyers and sellers.

When a good is excludable but not rival, it is an example of a:

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

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

Advocates of anti-poverty programs argue that private charity is not enough to fight poverty because of the free-rider problem.

Profit-seeking firms will devote little effort to develop general knowledge as:

Explain the differences between public goods and private goods.

Do cost-benefit analysts need to attach a dollar value to human life when increased safety is a benefit of a proposed project?

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

Business Strategy

Competition Policy

Monopolistic Competition

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

Five Debates Over Macroeconomic Policy

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