Question 1

Labor is a

Accepted Answer

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

Question 2

The local fire department wants to buy some new equipment at a cost of $1 million.If a human life is worth $10 million,the equipment is worth buying if it reduces the risk of someone dying in a fire over the life of the equipment by at least

Accepted Answer

A)  1 percentage point. 
B)  5 percentage points. 
C)  7 percentage points. 
D)  10 percentage points. 
A)  1 percentage point. 
B)  5 percentage points. 
C)  7 percentage points. 
D)  10 percentage points.

Question 3

Governments can grant private property rights over resources that were previously viewed as public,such as fish or elephants.Why would governments want to do so?

Accepted Answer

A)  to prevent overuse 
B)  to decrease taxes 
C)  to fight poverty 
D)  to increase consumption 
A)  to prevent overuse 
B)  to decrease taxes 
C)  to fight poverty 
D)  to increase consumption

Question 4

Each of the following would be considered a common resource except

Accepted Answer

A)  clean air. 
B)  congested nontoll roads. 
C)  national defense. 
D)  open grazing land. 
A)  clean air. 
B)  congested nontoll roads. 
C)  national defense. 
D)  open grazing land.

Question 5

Some goods,such as lighthouses,can switch between being public goods and being private goods depending on the circumstances.

Accepted Answer

A) True 
 B)False

Question 6

At the local park there is a playground that anyone may use.There is rarely anyone using the playground,so children who use the playground receive full enjoyment from its use.The playground is

Accepted Answer

A)  rival in consumption and is excludable. 
B)  not rival in consumption,but is excludable. 
C)  rival in consumption,but is not excludable. 
D)  not rival in consumption nor is it excludable. 
A)  rival in consumption and is excludable. 
B)  not rival in consumption,but is excludable. 
C)  rival in consumption,but is not excludable. 
D)  not rival in consumption nor is it excludable.

Question 7

An FM radio signal is an example of a good that is

Accepted Answer

A)  private. 
B)  nonrival in consumption. 
C)  social. 
D)  nonexcludable in production. 
A)  private. 
B)  nonrival in consumption. 
C)  social. 
D)  nonexcludable in production.

Question 8

When a free-rider problem exists,

Accepted Answer

A)  the market will devote too few resources to the production of the good. 
B)  the cost of the good will always be more than the benefit of the good. 
C)  the good will not be produced. 
D)  entrepreneurs will eventually find a way to make free-riders pay their share. 
A)  the market will devote too few resources to the production of the good. 
B)  the cost of the good will always be more than the benefit of the good. 
C)  the good will not be produced. 
D)  entrepreneurs will eventually find a way to make free-riders pay their share.

Question 9

The Tragedy of the Commons results when a good is

Accepted Answer

A)  rival in consumption and not excludable. 
B)  excludable and not rival in consumption. 
C)  both rival in consumption and excludable. 
D)  neither rival in consumption nor excludable. 
A)  rival in consumption and not excludable. 
B)  excludable and not rival in consumption. 
C)  both rival in consumption and excludable. 
D)  neither rival in consumption nor excludable.

Question 10

The creation of knowledge is a public good.Because knowledge is a public good,profit-seeking firms tend to free-ride on the knowledge created by others and,as a result,devote too few resources to the creation of knowledge.How does the U.S.government correct for this apparent market failure?

Accepted Answer

The government assigns and protects the

Question 11

An example of the "Tragedy of the Commons" is litter in the picnic area of a local park.

Accepted Answer

A) True 
 B)False

Question 12

On hot summer days,electricity-generating capacity is sometimes stretched to the limit.At these times,electric companies may ask people to voluntarily cut back on their use of electricity.An economist would suggest that

Accepted Answer

A)  every electric customer has an incentive to prevent the system from overloading,so this voluntary approach is the most efficient. 
B)  it would be more efficient if the electric company raised its rates for electricity at peak times. 
C)  it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times. 
D)  it would be more efficient to force everyone to cut their usage of electricity by the same amount. 
A)  every electric customer has an incentive to prevent the system from overloading,so this voluntary approach is the most efficient. 
B)  it would be more efficient if the electric company raised its rates for electricity at peak times. 
C)  it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times. 
D)  it would be more efficient to force everyone to cut their usage of electricity by the same amount.

Question 13

People have little incentive to produce a public good because

Accepted Answer

A)  the social benefit is less than the private benefit. 
B)  the social benefit is less than the social cost. 
C)  there is a free-rider problem. 
D)  there is a Tragedy of the Commons. 
A)  the social benefit is less than the private benefit. 
B)  the social benefit is less than the social cost. 
C)  there is a free-rider problem. 
D)  there is a Tragedy of the Commons.

Question 14

Although national defense is currently a public good,economists who advocate small government generally agree that the U.S.should privatize national defense to increase the efficiency of the good.

Accepted Answer

A) True 
 B)False

Question 15

Both private goods and natural monopolies are

Accepted Answer

A)  rival in consumption. 
B)  nonrival in consumption. 
C)  excludable. 
D)  nonexcludable. 
A)  rival in consumption. 
B)  nonrival in consumption. 
C)  excludable. 
D)  nonexcludable.

Question 16

Goods that are not excludable include both

Accepted Answer

A)  private goods and public goods. 
B)  natural monopolies and common resources. 
C)  common resources and public goods. 
D)  private goods and natural monopolies. 
A)  private goods and public goods. 
B)  natural monopolies and common resources. 
C)  common resources and public goods. 
D)  private goods and natural monopolies.

Question 17

Most lighthouses are operated by the government because

Accepted Answer

A)  of the free-rider problem. 
B)  lighthouses are no longer valued by society. 
C)  most lighthouses are only tourist attractions in state and national parks. 
D)  shipping companies would not be able to afford maintenance fees for lighthouses. 
A)  of the free-rider problem. 
B)  lighthouses are no longer valued by society. 
C)  most lighthouses are only tourist attractions in state and national parks. 
D)  shipping companies would not be able to afford maintenance fees for lighthouses.

Question 18

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

Accepted Answer

A)  patents correct for an unknown portion of the externality. 
B)  benefits are hard to measure. 
C)  members of Congress are often experts in the sciences. 
D)  the costs always exceed the benefits. 
A)  patents correct for an unknown portion of the externality. 
B)  benefits are hard to measure. 
C)  members of Congress are often experts in the sciences. 
D)  the costs always exceed the benefits.

Question 19

What causes the Tragedy of the Commons?

Accepted Answer

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

Question 20

A cable television broadcast of a movie is

Accepted Answer

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

Exam 11: Public Goods and Common Resources

Labor is a

The local fire department wants to buy some new equipment at a cost of $1 million.If a human life is worth $10 million,the equipment is worth buying if it reduces the risk of someone dying in a fire over the life of the equipment by at least

Governments can grant private property rights over resources that were previously viewed as public,such as fish or elephants.Why would governments want to do so?

Each of the following would be considered a common resource except

Some goods,such as lighthouses,can switch between being public goods and being private goods depending on the circumstances.

At the local park there is a playground that anyone may use.There is rarely anyone using the playground,so children who use the playground receive full enjoyment from its use.The playground is

An FM radio signal is an example of a good that is

When a free-rider problem exists,

The Tragedy of the Commons results when a good is

The creation of knowledge is a public good.Because knowledge is a public good,profit-seeking firms tend to free-ride on the knowledge created by others and,as a result,devote too few resources to the creation of knowledge.How does the U.S.government correct for this apparent market failure?

An example of the "Tragedy of the Commons" is litter in the picnic area of a local park.

On hot summer days,electricity-generating capacity is sometimes stretched to the limit.At these times,electric companies may ask people to voluntarily cut back on their use of electricity.An economist would suggest that

People have little incentive to produce a public good because

Although national defense is currently a public good,economists who advocate small government generally agree that the U.S.should privatize national defense to increase the efficiency of the good.

Both private goods and natural monopolies are

Goods that are not excludable include both

Most lighthouses are operated by the government because

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

What causes the Tragedy of the Commons?

A cable television broadcast of a movie is

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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