Question 1

A free-rider problem exists for any good that is not

Accepted Answer

A)  rival in consumption. 
B)  a private good. 
C)  free. 
D)  excludable. 
A)  rival in consumption. 
B)  a private good. 
C)  free. 
D)  excludable.

Question 2

Suppose that a small county is considering adding a guard rail to a dangerous curve by a river.The guard rail will cost $70,000.The average damage done to vehicles that slide off the road at the curve is $10,000.It is expected that the guard rail will prevent 5 vehicles from sliding off the road during its usable life.What should the county do?

Accepted Answer

A)  Install the guard rail because safety is priceless. 
B)  Install the guard rail because the benefits exceed the costs. 
C)  Do not install the guard rail because the costs exceed the benefits. 
D)  Do not install the guard rail at any cost because drivers can purchase private insurance for their vehicles. 
A)  Install the guard rail because safety is priceless. 
B)  Install the guard rail because the benefits exceed the costs. 
C)  Do not install the guard rail because the costs exceed the benefits. 
D)  Do not install the guard rail at any cost because drivers can purchase private insurance for their vehicles.

Question 3

Imagine a 2,000-acre park with picnic benches,trees,and a pond.Suppose it is publicly owned,and people are invited to enjoy its beauty.When the weather is nice,it is difficult to find parking,and the trash cans overflow with food wrappers on summer afternoons.Otherwise,it is a great place.The park is a common resource because

Accepted Answer

A)  people can be prevented from using it. 
B)  access is limited due to driving distances. 
C)  if too many people use it,one person's use diminishes other peoples' use. 
D)  anyone can use it without affecting anyone else. 
A)  people can be prevented from using it. 
B)  access is limited due to driving distances. 
C)  if too many people use it,one person's use diminishes other peoples' use. 
D)  anyone can use it without affecting anyone else.

Question 4

Which of the following represents a potential solution to the problem of environmental pollution?

Accepted Answer

A)  corrective taxes 
B)  well established property rights 
C)  government regulation 
D)  All of the above are correct. 
A)  corrective taxes 
B)  well established property rights 
C)  government regulation 
D)  All of the above are correct.

Question 5

An overcrowded beach is an example of

Accepted Answer

A)  a positive externality. 
B)  a Tragedy of the Commons. 
C)  an environmentally inefficient allocation of resources. 
D)  an economically unfair allocation of resources. 
A)  a positive externality. 
B)  a Tragedy of the Commons. 
C)  an environmentally inefficient allocation of resources. 
D)  an economically unfair allocation of resources.

Question 6

If the use of a common resource is not regulated,

Accepted Answer

A)  no one can enjoy it. 
B)  it will tend to be underused. 
C)  property rights will be clearly defined. 
D)  it will be overused. 
A)  no one can enjoy it. 
B)  it will tend to be underused. 
C)  property rights will be clearly defined. 
D)  it will be overused.

Question 7

Ten friends who love to ski decide to pool their financial resources and equally share the cost of a one-week time-share condominium in Alta,Utah.Suppose that the lift lines at the ski resort become more congested when the ten additional people start to ski.Which of the following statements is not correct?

Accepted Answer

A)  Use of the ski resort by the ten new skiers will yield a negative externality. 
B)  The ski resort can reduce the congestion externality by raising lift ticket prices. 
C)  An increase in lift ticket prices 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 ski resort by the ten new skiers will yield a negative externality. 
B)  The ski resort can reduce the congestion externality by raising lift ticket prices. 
C)  An increase in lift ticket prices 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 8

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 $400.How many streetlights should the town install to maximize total surplus from the streetlights?

Accepted Answer

A)  1 streetlight 
B)  2 streetlights 
C)  3 streetlights 
D)  4 streetlights 
A)  1 streetlight 
B)  2 streetlights 
C)  3 streetlights 
D)  4 streetlights

Question 9

Why do elephants face the threat of extinction while cows do not?

Accepted Answer

A)  Cattle are a valuable source of income for many people,while elephants have no market value. 
B)  There is a high demand for products that come from cows,whereas there is no demand for products that come from elephants. 
C)  There are still lots of cattle that roam free,while all elephants live in zoos. 
D)  Cattle are owned by ranchers,while elephants are owned by no one. 
A)  Cattle are a valuable source of income for many people,while elephants have no market value. 
B)  There is a high demand for products that come from cows,whereas there is no demand for products that come from elephants. 
C)  There are still lots of cattle that roam free,while all elephants live in zoos. 
D)  Cattle are owned by ranchers,while elephants are owned by no one.

Question 10

Which of the following is not a common resource?

Accepted Answer

A)  congested roads 
B)  clean water 
C)  wild gorillas 
D)  a fireworks display 
A)  congested roads 
B)  clean water 
C)  wild gorillas 
D)  a fireworks display

Question 11

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 33rd unit of national defense in Happyville?

Accepted Answer

A)  $0 
B)  $2 
C)  $4 
D)  $6 
A)  $0 
B)  $2 
C)  $4 
D)  $6

Question 12

Private decisions about consumption of common resources and production of public goods usually lead to an

Accepted Answer

A)  efficient allocation of resources and external effects. 
B)  efficient allocation of resources and no external effects. 
C)  inefficient allocation of resources and external effects. 
D)  inefficient allocation of resources and no external effects. 
A)  efficient allocation of resources and external effects. 
B)  efficient allocation of resources and no external effects. 
C)  inefficient allocation of resources and external effects. 
D)  inefficient allocation of resources and no external effects.

Question 13

Too few resources are devoted to the creation of knowledge because profit-seeking firms

Accepted Answer

A)  undervalue knowledge in their pursuit of revenues. 
B)  overuse their patents. 
C)  tend to free-ride on the knowledge that others have developed. 
D)  tend to rely on existing employee knowledge. 
A)  undervalue knowledge in their pursuit of revenues. 
B)  overuse their patents. 
C)  tend to free-ride on the knowledge that others have developed. 
D)  tend to rely on existing employee knowledge.

Question 14

Three business people meet for lunch at an Indian restaurant.They decide that each person will order an item off the menu,and they will share all dishes.They will split the cost of the final bill evenly among each of the people at the table.When the food is delivered to the table,each person faces incentives similar to the

Accepted Answer

A)  consumption of a common resource good. 
B)  production of a public good. 
C)  consumption of a natural monopoly good. 
D)  production of a private good. 
A)  consumption of a common resource good. 
B)  production of a public good. 
C)  consumption of a natural monopoly good. 
D)  production of a private good.

Question 15

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 $30 per acre and that the residents have agreed to split the cost of building the park equally.If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park,how much total surplus will Jim receive?

Accepted Answer

A)  -$2 
B)  $2 
C)  $6 
D)  $10 
A)  -$2 
B)  $2 
C)  $6 
D)  $10

Question 16

One person's use of common resources does not reduce the enjoyment other people receive from the resource.

Accepted Answer

A) True 
 B)False

Question 17

Mayor Bloomberg of New York proposed a plan in which the city could be "greater" and "greener" by 2030.The plan included imposing a congestion toll.Which of the following is not an advantage of the tolls?

Accepted Answer

A)  The congestion toll will place a greater burden on the poor and middle class. 
B)  The congestion toll will reduce carbon dioxide emissions. 
C)  The congestion toll will reduce travel time delay. 
D)  The congestion toll can vary based on the time of day. 
A)  The congestion toll will place a greater burden on the poor and middle class. 
B)  The congestion toll will reduce carbon dioxide emissions. 
C)  The congestion toll will reduce travel time delay. 
D)  The congestion toll can vary based on the time of day.

Question 18

Which of the following is not a reason why government agencies subsidize basic research?

Accepted Answer

A)  The private market devotes too few resources to basic research. 
B)  The general knowledge developed through basic research can be used without charge. 
C)  The social benefit of additional knowledge is perceived to be greater than the cost of the subsidies. 
D)  The government wants to attract the brightest researchers away from private research firms. 
A)  The private market devotes too few resources to basic research. 
B)  The general knowledge developed through basic research can be used without charge. 
C)  The social benefit of additional knowledge is perceived to be greater than the cost of the subsidies. 
D)  The government wants to attract the brightest researchers away from private research firms.

Question 19

Because public goods are

Accepted Answer

A)  excludable,people have an incentive to be free riders. 
B)  excludable,people do not have an incentive to be free riders. 
C)  not excludable,people have an incentive to be free riders. 
D)  not excludable,people do not have an incentive to be free riders. 
A)  excludable,people have an incentive to be free riders. 
B)  excludable,people do not have an incentive to be free riders. 
C)  not excludable,people have an incentive to be free riders. 
D)  not excludable,people do not have an incentive to be free riders.

Question 20

The free-rider problem

Accepted Answer

A)  forces the supply of a public good to exceed its demand. 
B)  results in common resources becoming natural monopolies. 
C)  explains why many local governments supply public goods. 
D)  results in public goods becoming private goods. 
A)  forces the supply of a public good to exceed its demand. 
B)  results in common resources becoming natural monopolies. 
C)  explains why many local governments supply public goods. 
D)  results in public goods becoming private goods.

Exam 11: Public Goods and Common Resources

A free-rider problem exists for any good that is not

Which of the following represents a potential solution to the problem of environmental pollution?

An overcrowded beach is an example of

If the use of a common resource is not regulated,

Why do elephants face the threat of extinction while cows do not?

Which of the following is not a common resource?

Private decisions about consumption of common resources and production of public goods usually lead to an

Too few resources are devoted to the creation of knowledge because profit-seeking firms

One person's use of common resources does not reduce the enjoyment other people receive from the resource.

Mayor Bloomberg of New York proposed a plan in which the city could be "greater" and "greener" by 2030.The plan included imposing a congestion toll.Which of the following is not an advantage of the tolls?

Which of the following is not a reason why government agencies subsidize basic research?

Because public goods are

The free-rider problem

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