Exam 11: Public Goods and Common Resources

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

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

Scenario 11-1 Becky is a single mother of two young children who spend their days at a daycare center while Becky goes to work. The daycare center closes at 5:30. If parents do not pick up their children at or before 5:30, the daycare center charges a late fee of $5 per child for every 10 minutes the parent is late. -Refer to Scenario 11-1. Due to traffic, Becky expects to be 20 minutes late to pick up her children. How much would she be willing to pay for a variable toll road that would get her to the daycare center on time?

Private goods are both

By driving onto a congested road for which no toll is charged, a driver

National defense is provided by the government because

If we can conclude that human life has a finite value, cost-benefit analysis can lead to solutions in which human life is worth less than the cost of a potential project.

When a good is excludable,

Goods that are excludable include both

A common theme among examples of market failure is

Suppose the cost to erect a tornado siren in a small town is $15,000. In addition, suppose the value of a human life is $10 million. By what percentage would the siren need to reduce the risk of a fatality for the benefits of the siren to exceed the costs of the siren?

Figure 11-1 Rival in Consumption? -Refer to Figure 11-1. In which box - A, B, C, or D - does each of the following types of roads belong? (Consider each type of road separately.) -an uncongested toll road -an uncongested nontoll road -a congested toll road -a congested nontoll road

A free-rider is someone who receives the benefit of a good but avoids paying for it.

A good is excludable if

Some advocates of antipoverty programs claim that fighting poverty is a public good. Describe why government intervention may be necessary to reduce poverty.

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

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

Advocates of antipoverty programs believe that fighting poverty

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?

Table 11-2 Consider a small town with only three families, the Greene family, the Brown family, and the Black 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 $360 and the families have agreed to split the cost of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the greatest number of streetlights for which the majority of families would vote "yes?"