Question 1

Advocates of antipoverty programs claim that fighting poverty is a public good.

Accepted Answer

A) True 
 B)False

Question 2

Consider the following problems: Overcrowded public highways,overfishing in the ocean,polluted air,and the near-extinction of the wild rhinoceros.What do these problems have in common?

Accepted Answer

A)  Private markets could easily solve them if governments left the markets alone. 
B)  They would all go away if the government sponsored an intensive public-information campaign. 
C)  They are all the result of a failure to establish clear property rights over something of value. 
D)  They are all the result of a failure of corrective taxes. 
A)  Private markets could easily solve them if governments left the markets alone. 
B)  They would all go away if the government sponsored an intensive public-information campaign. 
C)  They are all the result of a failure to establish clear property rights over something of value. 
D)  They are all the result of a failure of corrective taxes.

Question 3

Private markets usually fail to provide lighthouses because

Accepted Answer

A)  lighthouses cost too much to build relative to their benefits. 
B)  government intervention makes it hard for private lighthouse owners to compete in the market. 
C)  ship captains have incentives to use lighthouses without paying. 
D)  lighthouses are valued very little by ship captains these days. 
A)  lighthouses cost too much to build relative to their benefits. 
B)  government intervention makes it hard for private lighthouse owners to compete in the market. 
C)  ship captains have incentives to use lighthouses without paying. 
D)  lighthouses are valued very little by ship captains these days.

Question 4

Which parable describes the problem of wild animals that are hunted to the point of extinction?

Accepted Answer

A)  Coase theorem 
B)  Tragedy of the Commons 
C)  Cost-benefit analysis 
D)  Clean Air Act 
A)  Coase theorem 
B)  Tragedy of the Commons 
C)  Cost-benefit analysis 
D)  Clean Air Act

Question 5

Each of the following explains why cost-benefit analysis is difficult except

Accepted Answer

A)  there is no price with which to judge the value of a public good. 
B)  surveys are often biased and unreliable. 
C)  it is difficult to identify all factors that influence costs and benefits of public goods. 
D)  government projects rarely have sufficient funding to complete them on time. 
A)  there is no price with which to judge the value of a public good. 
B)  surveys are often biased and unreliable. 
C)  it is difficult to identify all factors that influence costs and benefits of public goods. 
D)  government projects rarely have sufficient funding to complete them on time.

Question 6

On holiday weekends thousands of people picnic in state parks.Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero.An overcrowded picnic area is an example of

Accepted Answer

A)  a private good. 
B)  a natural monopoly. 
C)  a Tragedy of the Commons. 
D)  public good. 
A)  a private good. 
B)  a natural monopoly. 
C)  a Tragedy of the Commons. 
D)  public good.

Question 7

Excludability is the property of a good whereby

Accepted Answer

A)  one person's use diminishes other peoples' use. 
B)  a person can be prevented from using it. 
C)  a good is private,not public. 
D)  a good is public,not private. 
A)  one person's use diminishes other peoples' use. 
B)  a person can be prevented from using it. 
C)  a good is private,not public. 
D)  a good is public,not private.

Question 8

A stairwell in a certain office building is always congested at 12:00 p.m.and 2:00 p.m.The congestion is so bad that people have been complaining to the building's owner.Which of the following methods would be the most efficient way of reducing congestion?

Accepted Answer

A)  Assign each person in the building a time when they are allowed to use the stairwell. 
B)  Encourage people to voluntarily keep off the stairwell during peak times. 
C)  Charge everyone who uses the stairwell when it is congested the same fee.People who value the use of the stairs the most will be the ones who use the stairwell at peak times. 
D)  Hold a lottery to determine who wins the right to use the stairwell at peak times. 
A)  Assign each person in the building a time when they are allowed to use the stairwell. 
B)  Encourage people to voluntarily keep off the stairwell during peak times. 
C)  Charge everyone who uses the stairwell when it is congested the same fee.People who value the use of the stairs the most will be the ones who use the stairwell at peak times. 
D)  Hold a lottery to determine who wins the right to use the stairwell at peak times.

Question 9

When a good is excludable,

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 using 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 using the good.

Question 10

Elephants are endangered,but cows are not because

Accepted Answer

A)  cows are not as valuable as elephants. 
B)  elephants are a common resource,while cows are private goods. 
C)  cows are a common resource,while elephants are private goods. 
D)  it is legal to kill cows but not elephants. 
A)  cows are not as valuable as elephants. 
B)  elephants are a common resource,while cows are private goods. 
C)  cows are a common resource,while elephants are private goods. 
D)  it is legal to kill cows but not elephants.

Question 11

Which of the following is most likely to face extinction?

Accepted Answer

A)  dogs living as pets in households 
B)  dairy cows living on farms and producing milk 
C)  bald eagles living in zoos 
D)  tigers living in the wild 
A)  dogs living as pets in households 
B)  dairy cows living on farms and producing milk 
C)  bald eagles living in zoos 
D)  tigers living in the wild

Question 12

Pay-per-view broadcasts are

Accepted Answer

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

Question 13

Markets may fail to allocate resources efficiently when property rights are not well established.

Accepted Answer

A) True 
 B)False

Question 14

Aristotle writes,"What is common to many is taken least care of,for all men have greater regard for what is their own than for what they possess in common with others." In this statement,Aristotle is referring to the free-rider problem that occurs when a person receives the benefit of a good without paying for it.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is not correct?

Accepted Answer

A)  A free rider is a person who benefits from something for which he or she does not have to pay. 
B)  The creation of knowledge is a public good. 
C)  The Tragedy of the Commons illustrates the underuse of a common resource. 
D)  A gasoline tax is an imperfect solution to the problem of traffic congestion on public roads. 
A)  A free rider is a person who benefits from something for which he or she does not have to pay. 
B)  The creation of knowledge is a public good. 
C)  The Tragedy of the Commons illustrates the underuse of a common resource. 
D)  A gasoline tax is an imperfect solution to the problem of traffic congestion on public roads.

Question 16

The government provides public goods because

Accepted Answer

A)  private markets are incapable of producing these types of goods. 
B)  free-riders make it difficult for private markets to supply the socially optimal quantity. 
C)  markets are always better off with some government oversight. 
D)  external benefits will accrue to private producers. 
A)  private markets are incapable of producing these types of goods. 
B)  free-riders make it difficult for private markets to supply the socially optimal quantity. 
C)  markets are always better off with some government oversight. 
D)  external benefits will accrue to private producers.

Question 17

Many species of animals are common resources,and many must be protected by law to keep them from extinction.Why is the cow not one of these endangered species even though there is such a high demand for beef?

Accepted Answer

A)  Cows reproduce at a high rate and have adapted well to their environment. 
B)  Public policies protect cows from predators and diseases. 
C)  Cows are privately owned,whereas many endangered species are owned by no one. 
D)  There is a natural ecological balance between the birth rate of cows and human consumption. 
A)  Cows reproduce at a high rate and have adapted well to their environment. 
B)  Public policies protect cows from predators and diseases. 
C)  Cows are privately owned,whereas many endangered species are owned by no one. 
D)  There is a natural ecological balance between the birth rate of cows and human consumption.

Question 18

Suppose that the Town of Podunk is considering hiring an additional police officer.The reduction in crime is estimated to be worth $10 for each of Podunk's 4,500 residents.What should the city do?

Accepted Answer

A)  Hire the police officer because additional safety is priceless. 
B)  Hire the police officer if the cost of the new officer is less than $45,000. 
C)  Do not hire the police officer because the costs exceed the benefits. 
D)  Hire the police officer only if the benefit to the residents exceeds $4,500. 
A)  Hire the police officer because additional safety is priceless. 
B)  Hire the police officer if the cost of the new officer is less than $45,000. 
C)  Do not hire the police officer because the costs exceed the benefits. 
D)  Hire the police officer only if the benefit to the residents exceeds $4,500.

Question 19

Who among the following is a free rider?

Accepted Answer

A)  Barry buys candy from the store where he works. 
B)  Betty rides to work with Sally,but she pays Sally for gasoline and other travel-related expenses. 
C)  Joe drives 20,000 miles a year on public streets,but he pays no more in property taxes than Sam,who only drives 1,000 miles. 
D)  Fred watches many public television programs,but he has never sent in a contribution to the station. 
A)  Barry buys candy from the store where he works. 
B)  Betty rides to work with Sally,but she pays Sally for gasoline and other travel-related expenses. 
C)  Joe drives 20,000 miles a year on public streets,but he pays no more in property taxes than Sam,who only drives 1,000 miles. 
D)  Fred watches many public television programs,but he has never sent in a contribution to the station.

Question 20

A town engineer comes to the city council with a proposal to install a traffic light at a certain intersection that currently has a stop sign.The benefit of the traffic light is increased safety because the light will reduce the incidence of fatal traffic accidents by 50 percent per year.Which of the following statements is correct?

Accepted Answer

A)  The city council should vote to install the traffic light because the benefits will outweigh the costs. 
B)  The city council should carefully evaluate the benefits of reduced fatalities against only the explicit costs of the light. 
C)  The city council should carefully evaluate the benefits of reduced fatalities against the costs of the light and of the extra time that drivers will spend waiting for a green light. 
D)  The costs will invariably outweigh the benefits. 
A)  The city council should vote to install the traffic light because the benefits will outweigh the costs. 
B)  The city council should carefully evaluate the benefits of reduced fatalities against only the explicit costs of the light. 
C)  The city council should carefully evaluate the benefits of reduced fatalities against the costs of the light and of the extra time that drivers will spend waiting for a green light. 
D)  The costs will invariably outweigh the benefits.

Exam 11: Public Goods and Common Resources

Advocates of antipoverty programs claim that fighting poverty is a public good.

Consider the following problems: Overcrowded public highways,overfishing in the ocean,polluted air,and the near-extinction of the wild rhinoceros.What do these problems have in common?

Private markets usually fail to provide lighthouses because

Which parable describes the problem of wild animals that are hunted to the point of extinction?

Each of the following explains why cost-benefit analysis is difficult except

On holiday weekends thousands of people picnic in state parks.Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero.An overcrowded picnic area is an example of

Excludability is the property of a good whereby

A stairwell in a certain office building is always congested at 12:00 p.m.and 2:00 p.m.The congestion is so bad that people have been complaining to the building's owner.Which of the following methods would be the most efficient way of reducing congestion?

When a good is excludable,

Elephants are endangered,but cows are not because

Which of the following is most likely to face extinction?

Pay-per-view broadcasts are

Markets may fail to allocate resources efficiently when property rights are not well established.

Which of the following statements is not correct?

The government provides public goods because

Many species of animals are common resources,and many must be protected by law to keep them from extinction.Why is the cow not one of these endangered species even though there is such a high demand for beef?

Suppose that the Town of Podunk is considering hiring an additional police officer.The reduction in crime is estimated to be worth $10 for each of Podunk's 4,500 residents.What should the city do?

Who among the following is a free rider?

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

Filters