Question 1

Markets fail to allocate resources efficiently when

Accepted Answer

A)  prices fluctuate. 
B)  people who have property rights abuse their privileges. 
C)  property rights are not well established. 
D)  the government refuses to intervene in private markets. 
A)  prices fluctuate. 
B)  people who have property rights abuse their privileges. 
C)  property rights are not well established. 
D)  the government refuses to intervene in private markets.

Question 2

Which of the following statements is true of the tax on gasoline?

Accepted Answer

A)  The cost of collecting a gasoline tax outweighs the revenues raised by the tax. 
B)  It is preferred to tolls as the best solution to road congestion. 
C)  It discourages driving on noncongested roads,even though there is no congestion externality for these roads. 
D)  Both b and c are correct. 
A)  The cost of collecting a gasoline tax outweighs the revenues raised by the tax. 
B)  It is preferred to tolls as the best solution to road congestion. 
C)  It discourages driving on noncongested roads,even though there is no congestion externality for these roads. 
D)  Both b and c are correct.

Question 3

The Occupational Safety and Health Administration (OSHA)has determined that 100 workers are exposed to a hazardous chemical used in the production of diet soft drinks.The cost of imposing a regulation that would ban the chemical is $10 million.OSHA has calculated that each person saved by this regulation has a value equal to $10 million.If the benefits are exactly equal to the costs,what probability is OSHA using to assess the likelihood of a fatality from exposure to this chemical?

Accepted Answer

A)  0.001 
B)  0.01 
C)  0.1 
D)  1.0 
A)  0.001 
B)  0.01 
C)  0.1 
D)  1.0

Question 4

The government often intervenes when private markets fail to provide an optimal level of certain goods and services.For example,the government imposes an excise tax on gasoline to account for the negative externality that drivers impose on one another.Why might the private market not reach the socially optimal level of traffic without the help of government?

Accepted Answer

It is possible that everyone can agree t

Question 5

Private companies will invest in medical research if

Accepted Answer

A)  they will produce general knowledge. 
B)  they will produce a specific product for which they may receive a patent. 
C)  there is no government intervention in the market for medical products. 
D)  others will benefit from their discoveries. 
A)  they will produce general knowledge. 
B)  they will produce a specific product for which they may receive a patent. 
C)  there is no government intervention in the market for medical products. 
D)  others will benefit from their discoveries.

Question 6

Ten friends who love the beach decide to pool their financial resources and equally share the cost of a one-week time-share condominium in San Diego,California.Suppose that the beach outside of the condominium becomes more congested when the ten additional people join the other beachgoers.Which of the following statements is not correct?

Accepted Answer

A)  Use of the beach by the ten new beachgoers will yield a negative externality. 
B)  The beach can reduce the congestion externality by raising the fee to access the beach. 
C)  An increase in the fee to access the beach could be viewed as a corrective tax on the externality of congestion. 
D)  Each of the ten friends would have been better off staying at home. 
A)  Use of the beach by the ten new beachgoers will yield a negative externality. 
B)  The beach can reduce the congestion externality by raising the fee to access the beach. 
C)  An increase in the fee to access the beach could be viewed as a corrective tax on the externality of congestion. 
D)  Each of the ten friends would have been better off staying at home.

Question 7

London charges drivers driving in "congestion zones" a tax in order to reduce traffic congestion.

Accepted Answer

A) True 
 B)False

Question 8

The ocean remains one of the largest unregulated resources for each of the following reasons except

Accepted Answer

A)  many countries have access to the ocean. 
B)  it is difficult to get international cooperation among countries that hold different values. 
C)  the oceans are so vast that enforcing any agreements would be difficult. 
D)  All of the above are reasons the ocean remains one of the largest unregulated resources. 
A)  many countries have access to the ocean. 
B)  it is difficult to get international cooperation among countries that hold different values. 
C)  the oceans are so vast that enforcing any agreements would be difficult. 
D)  All of the above are reasons the ocean remains one of the largest unregulated resources.

Question 9

When a good is rival in consumption,

Accepted Answer

A)  one person's use of the good diminishes another person's ability to use it. 
B)  people can be prevented from using the good. 
C)  no more than one person can use the good at the same time. 
D)  everyone will be excluded from obtaining the good. 
A)  one person's use of the good diminishes another person's ability to use it. 
B)  people can be prevented from using the good. 
C)  no more than one person can use the good at the same time. 
D)  everyone will be excluded from obtaining the good.

Question 10

Most goods in our economy are allocated in markets,where buyers pay for what they receive and sellers are paid for what they provide.

Accepted Answer

A) True 
 B)False

Question 11

A cost-benefit analysis of a highway is difficult to conduct because analysts

Accepted Answer

A)  cannot estimate the explicit cost of a project that has not been completed. 
B)  are unlikely to have access to costs on similar projects. 
C)  are not able to consider the opportunity cost of resources. 
D)  will have difficulty estimating the value of the highway. 
A)  cannot estimate the explicit cost of a project that has not been completed. 
B)  are unlikely to have access to costs on similar projects. 
C)  are not able to consider the opportunity cost of resources. 
D)  will have difficulty estimating the value of the highway.

Question 12

The free-rider problem exists with

Accepted Answer

A)  apples. 
B)  knowledge. 
C)  cable TV service. 
D)  congested toll roads. 
A)  apples. 
B)  knowledge. 
C)  cable TV service. 
D)  congested toll roads.

Question 13

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource.To correct for this problem,the town could

Accepted Answer

A)  allow individual shepherds to chose their own flock sizes. 
B)  internalize the externality by subsidizing the production of sheep's wool. 
C)  auction off a limited number of sheep-grazing permits. 
D)  wait until the market corrects the problem. 
A)  allow individual shepherds to chose their own flock sizes. 
B)  internalize the externality by subsidizing the production of sheep's wool. 
C)  auction off a limited number of sheep-grazing permits. 
D)  wait until the market corrects the problem.

Question 14

Free goods are usually efficiently allocated without government intervention.

Accepted Answer

A) True 
 B)False

Question 15

It is commonly argued that national defense is a public good.Nevertheless,the weapons used by the U.S.military are produced by private firms.We can conclude that

Accepted Answer

A)  resources would be used more efficiently if the government produced the weapons. 
B)  resources would be used more efficiently if private firms provided national defense. 
C)  weapons are rival in consumption and excludable,but national defense is not rival in consumption and not excludable. 
D)  national defense is rival in consumption and excludable,but weapons are not rival in consumption and not excludable. 
A)  resources would be used more efficiently if the government produced the weapons. 
B)  resources would be used more efficiently if private firms provided national defense. 
C)  weapons are rival in consumption and excludable,but national defense is not rival in consumption and not excludable. 
D)  national defense is rival in consumption and excludable,but weapons are not rival in consumption and not excludable.

Question 16

Government agencies,such as the National Science Foundation,subsidize basic research because in the absence of a subsidy too little research would be conducted.

Accepted Answer

A) True 
 B)False

Question 17

The overuse of a common resource relative to its economically efficient use is called

Accepted Answer

A)  the free rider problem. 
B)  the Tragedy of the Commons. 
C)  a public good. 
D)  cost-benefit analysis. 
A)  the free rider problem. 
B)  the Tragedy of the Commons. 
C)  a public good. 
D)  cost-benefit analysis.

Question 18

When one person enjoys the benefit of a tornado siren,she reduces the benefit to others.

Accepted Answer

A) True 
 B)False

Question 19

The free-rider problem arises when the number of beneficiaries is large and exclusion of any of them is impossible.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is an example of the Tragedy of the Commons?

Accepted Answer

A)  The number of professional football teams increases to the point where the quality of the games decreases,as does television viewership. 
B)  The number of satellites increases to the point where they begin running into each other. 
C)  Disney World becomes so crowded that it institutes a lottery for admissions. 
D)  A tiger breeding program becomes so successful that local zoos have to build additional exhibits so that visitors can view the cats. 
A)  The number of professional football teams increases to the point where the quality of the games decreases,as does television viewership. 
B)  The number of satellites increases to the point where they begin running into each other. 
C)  Disney World becomes so crowded that it institutes a lottery for admissions. 
D)  A tiger breeding program becomes so successful that local zoos have to build additional exhibits so that visitors can view the cats.

Exam 11: Public Goods and Common Resources

Markets fail to allocate resources efficiently when

Which of the following statements is true of the tax on gasoline?

Private companies will invest in medical research if

London charges drivers driving in "congestion zones" a tax in order to reduce traffic congestion.

The ocean remains one of the largest unregulated resources for each of the following reasons except

When a good is rival in consumption,

Most goods in our economy are allocated in markets,where buyers pay for what they receive and sellers are paid for what they provide.

A cost-benefit analysis of a highway is difficult to conduct because analysts

The free-rider problem exists with

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource.To correct for this problem,the town could

Free goods are usually efficiently allocated without government intervention.

It is commonly argued that national defense is a public good.Nevertheless,the weapons used by the U.S.military are produced by private firms.We can conclude that

Government agencies,such as the National Science Foundation,subsidize basic research because in the absence of a subsidy too little research would be conducted.

The overuse of a common resource relative to its economically efficient use is called

When one person enjoys the benefit of a tornado siren,she reduces the benefit to others.

The free-rider problem arises when the number of beneficiaries is large and exclusion of any of them is impossible.

Which of the following is an example of the Tragedy of the Commons?

Ten Principles of 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

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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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