Question 1

Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except

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)  asking individuals to voluntarily reduce their use of the resource. 
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)  asking individuals to voluntarily reduce their use of the resource.

Question 2

Suppose a human life is worth $10 million.Installing a better lighting system in the city park would reduce the risk of someone being murdered there from 2.3 to 1.8 percent over the life of the system.The city should install the new lighting system if its cost does not exceed

Accepted Answer

A)  $50,000. 
B)  $180,000. 
C)  $230,000. 
D)  $500,000. 
A)  $50,000. 
B)  $180,000. 
C)  $230,000. 
D)  $500,000.

Question 3

Four roommates share an off-campus house and equally share the cost of rent.Everyone says that she values a clean house,yet the house is usually dirty.To an economist,a clean house in this case represents

Accepted Answer

A)  a common resource problem. 
B)  a public good. 
C)  a natural monopoly. 
D)  All of the above are correct. 
A)  a common resource problem. 
B)  a public good. 
C)  a natural monopoly. 
D)  All of the above are correct.

Question 4

Which of the following is not an advantage to congestion charges for motorists who wish to drive on busy streets?

Accepted Answer

A)  reduced carbon monoxide pollution 
B)  increased use of public transportation 
C)  improved taxi service 
D)  shorter travel time 
A)  reduced carbon monoxide pollution 
B)  increased use of public transportation 
C)  improved taxi service 
D)  shorter travel time

Question 5

Table 11-2
Consider a small town with only three families,the Jones family,the Harris family,and the Wong family.The town does not currently have any streetlights so it is very dark at night.The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install.The table below shows each family's willingness to pay for each streetlight.
  
-Refer to Table 11-2.Suppose the cost to install each streetlight is $200 and the families have agreed to split the cost of installing the streetlights equally.To maximize their own surplus,how many streetlights would the Jones's like the town to install?

Accepted Answer

A)  0 streetlights 
B)  1 streetlight 
C)  2 streetlights 
D)  3 streetlights 
A)  0 streetlights 
B)  1 streetlight 
C)  2 streetlights 
D)  3 streetlights

Question 6

The commercial value of ivory is a threat to the elephant,but the commercial value of beef is a guardian of the cow.This is because

Accepted Answer

A)  the cow is raised in developed countries,while the elephant lives primarily in less-developed countries. 
B)  cows are private goods,while elephants tend to roam freely without owners. 
C)  cows and elephants are public goods,but ivory is nonrival. 
D)  ivory is nonrival and nonexclusive,but beef is rival and exclusive. 
A)  the cow is raised in developed countries,while the elephant lives primarily in less-developed countries. 
B)  cows are private goods,while elephants tend to roam freely without owners. 
C)  cows and elephants are public goods,but ivory is nonrival. 
D)  ivory is nonrival and nonexclusive,but beef is rival and exclusive.

Question 7

A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.

Accepted Answer

A) True 
 B)False

Question 8

When goods do not have a price,which of the following primarily ensures that the good is produced?

Accepted Answer

A)  buyers 
B)  sellers 
C)  government 
D)  the market 
A)  buyers 
B)  sellers 
C)  government 
D)  the market

Question 9

The greatest difficulty with cost-benefit analysis of a public project is determining

Accepted Answer

A)  whether government revenue is sufficient to cover the cost of the project. 
B)  which contractor should be awarded the project. 
C)  the cost of the project. 
D)  the value or benefit of the project. 
A)  whether government revenue is sufficient to cover the cost of the project. 
B)  which contractor should be awarded the project. 
C)  the cost of the project. 
D)  the value or benefit of the project.

Question 10

A lighthouse is typically considered to be 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 11

You are the mayor of a town with 10,000 residents.The head of your economic development agency recently conducted a survey in which the 10,000 residents said that a small public library in the center of town would be worth $25 to each of them.The cost to build the library is $150,000.Which of the following is the most efficient option?

Accepted Answer

A)  The library should be built and paid for with donations collected from residents,as these donations should more than cover the cost of the library. 
B)  The library should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked. 
C)  The library should be built and paid for by the wealthiest ten percent of the residents. 
D)  The library should not be built. 
A)  The library should be built and paid for with donations collected from residents,as these donations should more than cover the cost of the library. 
B)  The library should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked. 
C)  The library should be built and paid for by the wealthiest ten percent of the residents. 
D)  The library should not be built.

Question 12

National defense is a classic example of a public good because

Accepted Answer

A)  there is no market for private security services. 
B)  it is difficult to exclude people from receiving the benefits from national defense once it is provided. 
C)  everyone agrees that some level of national defense is important,but only the government knows the optimal amount. 
D)  there are no private firms willing to supply defense goods such as tanks and weapons. 
A)  there is no market for private security services. 
B)  it is difficult to exclude people from receiving the benefits from national defense once it is provided. 
C)  everyone agrees that some level of national defense is important,but only the government knows the optimal amount. 
D)  there are no private firms willing to supply defense goods such as tanks and weapons.

Question 13

Table 11-1
Consider the town of Tritown with only three residents,Ed,Jim,and Tony.The three residents are trying to determine how large,in acres,they should build the public park.The table below shows each resident's willingness to pay for each acre of the park.
  
-Refer to Table 11-1.Suppose the cost to build the park is $14 per acre and that the residents have agreed to split the cost of building the park equally.If the residents vote to determine the size of park to build,basing their decision solely on their own willingness to pay (and trying to maximize their own surplus),what is the largest park size for which the majority of residents would vote "yes?"

Accepted Answer

A)  0 acres 
B)  1 acre 
C)  2 acres 
D)  3 acres 
A)  0 acres 
B)  1 acre 
C)  2 acres 
D)  3 acres

Question 14

A beach house in Florida is

Accepted Answer

A)  not rival in consumption and excludable. 
B)  rival in consumption and excludable. 
C)  not rival in consumption and not excludable. 
D)  rival in consumption and not excludable. 
A)  not rival in consumption and excludable. 
B)  rival in consumption and excludable. 
C)  not rival in consumption and not excludable. 
D)  rival in consumption and not excludable.

Question 15

Table 11-3
This table describes the defense demands for three groups of people in Happyville.The second,third,and fourth column shows the quantity that a group will demand for a given price (the first column).
  
-Refer to Table 11-3.What is the value of the 13th unit of national defense in Happyville?

Accepted Answer

A)  $8 
B)  $14 
C)  $18 
D)  $24 
A)  $8 
B)  $14 
C)  $18 
D)  $24

Question 16

You are the mayor of a town with 10,000 residents.The head of your economic development agency recently conducted a survey in which the 10,000 residents said that a small public library in the center of town would be worth $25 to each of them.Because the cost to build the library is only $150,000,you arrange to have the library built.Everyone in town enjoys the library,but when you asked for donations to pay for the library,you only collected $15,000.You are convinced that

Accepted Answer

A)  the survey must have overstated how much the library was worth to each resident;otherwise,you would have collected $250,000 in donations. 
B)  the cost of the library exceeded the social benefits. 
C)  the library was an example of the Tragedy of the Commons. 
D)  most residents of the town are probably free-riders at the library. 
A)  the survey must have overstated how much the library was worth to each resident;otherwise,you would have collected $250,000 in donations. 
B)  the cost of the library exceeded the social benefits. 
C)  the library was an example of the Tragedy of the Commons. 
D)  most residents of the town are probably free-riders at the library.

Question 17

Economists think that the best way to determine the value of a human life is to

Accepted Answer

A)  evaluate the value of a person's expected earnings in the labor market. 
B)  evaluate the risks people are willing to take and what they would have to be paid to take them. 
C)  determine a person's accumulated wealth at the time of death. 
D)  do nothing;human life is priceless. 
A)  evaluate the value of a person's expected earnings in the labor market. 
B)  evaluate the risks people are willing to take and what they would have to be paid to take them. 
C)  determine a person's accumulated wealth at the time of death. 
D)  do nothing;human life is priceless.

Question 18

Advocates of antipoverty programs claim that fighting poverty

Accepted Answer

A)  is best accomplished by charities. 
B)  is a public good. 
C)  is more efficiently accomplished by the market. 
D)  should not be attempted with tax dollars. 
A)  is best accomplished by charities. 
B)  is a public good. 
C)  is more efficiently accomplished by the market. 
D)  should not be attempted with tax dollars.

Question 19

Consider a good for which the number of people who benefit from the good is large and the exclusion of any one those people is impossible.In this case,the market for this good will likely

Accepted Answer

A)  be a natural monopoly. 
B)  have a free-rider problem 
C)  not exist. 
D)  be limited to a small number of units of production. 
A)  be a natural monopoly. 
B)  have a free-rider problem 
C)  not exist. 
D)  be limited to a small number of units of production.

Question 20

When Susie uses a common resource and diminishes other people's enjoyment of it,she creates

Accepted Answer

A)  a free rider problem. 
B)  an externality. 
C)  a nonrenewable resource. 
D)  general knowledge. 
A)  a free rider problem. 
B)  an externality. 
C)  a nonrenewable resource. 
D)  general knowledge.

Exam 11: Public Goods and Common Resources

Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except

Suppose a human life is worth $10 million.Installing a better lighting system in the city park would reduce the risk of someone being murdered there from 2.3 to 1.8 percent over the life of the system.The city should install the new lighting system if its cost does not exceed

Four roommates share an off-campus house and equally share the cost of rent.Everyone says that she values a clean house,yet the house is usually dirty.To an economist,a clean house in this case represents

Which of the following is not an advantage to congestion charges for motorists who wish to drive on busy streets?

The commercial value of ivory is a threat to the elephant,but the commercial value of beef is a guardian of the cow.This is because

A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.

When goods do not have a price,which of the following primarily ensures that the good is produced?

The greatest difficulty with cost-benefit analysis of a public project is determining

A lighthouse is typically considered to be a public good because

National defense is a classic example of a public good because

A beach house in Florida is

Economists think that the best way to determine the value of a human life is to

Advocates of antipoverty programs claim that fighting poverty

Consider a good for which the number of people who benefit from the good is large and the exclusion of any one those people is impossible.In this case,the market for this good will likely

When Susie uses a common resource and diminishes other people's enjoyment of it,she creates

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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