Question 1

When a common resource like grazing land, is plentiful and everyone can get all the good grazing land they want, a tragedy of the commons exists.

Accepted Answer

A) True 
 B)False

Question 2

A consortium of government, local councils, farmers and environmentalists has been created to try and manage the cattle effluent in rural streams. Identify a solution that may manage the resource better and explain how it may improve the water resources and protect them in the future.

Accepted Answer

Conferring property rights to farmers on

Question 3

Explain the difference between a common resource and a public good.

Accepted Answer

A public good is nei

Question 4

When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Which of the following statements is true of public goods?

Accepted Answer

A)  one person's enjoyment of a public good reduces another person's enjoyment of the same good 
B)  people cannot be prevented from using a public good 
C)  all of the above are true 
D)  none of the above is true 
A)  one person's enjoyment of a public good reduces another person's enjoyment of the same good 
B)  people cannot be prevented from using a public good 
C)  all of the above are true 
D)  none of the above is true

Question 7

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 8

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 9

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 10

Oceanic fish species like cod, are less prone to over-fishing because less people want to harvest them.

Accepted Answer

A) True 
 B)False

Question 11

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 12

A ship's captain who doesn't want to pay for a lighthouse service, must derive no benefit from the lighthouse.

Accepted Answer

A) True 
 B)False

Question 13

The use of road tolls to reduce traffic can be desirable for which of the following reasons? (i) they charge people according to consumption
(ii) they can help bring usage closer to its optimal level
(iii) rates can differ according to the time of day
(iv) the administrative costs are virtually non-existent

Accepted Answer

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

Question 14

In modern industrialised economies there are goods that can be consumed without paying for them.

Accepted Answer

A) True 
 B)False

Question 15

In the 1950s in Australia, estuarine crocodiles were hunted almost to extinction for their leather. This means the crocodiles were a:

Accepted Answer

A)  private good 
B)  public good 
C)  common resource 
D)  none of the above 
A)  private good 
B)  public good 
C)  common resource 
D)  none of the above

Question 16

Suppose that policymakers are doing a cost-benefit analysis on a proposal to add traffic barriers to a motorway. These barriers will reduce the number of fatal accidents on this motorway. Which of the following statements is true?

Accepted Answer

A)  the benefits will always exceed the cost because reducing the risk of accidents is so valuable 
B)  people will exaggerate the benefits of traffic barriers in a questionnaire on their values 
C)  it is not possible to put a dollar value on someone's life 
D)  the benefits will never exceed the cost, because people show they don't care about accident risks by buying unsafe cars 
A)  the benefits will always exceed the cost because reducing the risk of accidents is so valuable 
B)  people will exaggerate the benefits of traffic barriers in a questionnaire on their values 
C)  it is not possible to put a dollar value on someone's life 
D)  the benefits will never exceed the cost, because people show they don't care about accident risks by buying unsafe cars

Question 17

The most effective ways to solve highway congestion is to:

Accepted Answer

A)  to increase tolls as roads become busier and reduce tolls as the roads become less busy 
B)  to have a standard toll price 
C)  have an inner-city rail network 
D)  to reduce tolls as roads become busier and increase tolls as the roads become less busy 
A)  to increase tolls as roads become busier and reduce tolls as the roads become less busy 
B)  to have a standard toll price 
C)  have an inner-city rail network 
D)  to reduce tolls as roads become busier and increase tolls as the roads become less busy

Question 18

Which of the following statements is true of cost-benefit analysis? (i) analysts are not able to observe price signals
(ii) costs are explicit and quantified quite easily
(iii) benefits are rough approximations

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 19

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 20

To decide whether a public good should be provided, the government needs to know: (i) what the costs to society of providing the good are
(ii) what the benefits to society of providing the good are
(iii) what price people pay for the good in an actual market

Accepted Answer

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

Exam 11: Public Goods and Common Resources

When a common resource like grazing land, is plentiful and everyone can get all the good grazing land they want, a tragedy of the commons exists.

A consortium of government, local councils, farmers and environmentalists has been created to try and manage the cattle effluent in rural streams. Identify a solution that may manage the resource better and explain how it may improve the water resources and protect them in the future.

Explain the difference between a common resource and a public good.

When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

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

Which of the following statements is true of public goods?

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

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

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

Oceanic fish species like cod, are less prone to over-fishing because less people want to harvest them.

Markets may allocate natural resources wastefully if:

A ship's captain who doesn't want to pay for a lighthouse service, must derive no benefit from the lighthouse.

In modern industrialised economies there are goods that can be consumed without paying for them.

In the 1950s in Australia, estuarine crocodiles were hunted almost to extinction for their leather. This means the crocodiles were a:

Suppose that policymakers are doing a cost-benefit analysis on a proposal to add traffic barriers to a motorway. These barriers will reduce the number of fatal accidents on this motorway. Which of the following statements is true?

The most effective ways to solve highway congestion is to:

Which of the following statements is true of cost-benefit analysis? (i) analysts are not able to observe price signals (ii) costs are explicit and quantified quite easily (iii) benefits are rough approximations

The government provides public goods because:

To decide whether a public good should be provided, the government needs to know: (i) what the costs to society of providing the good are (ii) what the benefits to society of providing the good are (iii) what price people pay for the good in an actual market

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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