Question 1

Markets do not ensure that the air we breathe is clean because

Accepted Answer

A)  clean air has no value. 
B)  the government prevents markets from doing so. 
C)  property rights are not well established for clean air. 
D)  clean air is impossible to produce . 
A)  clean air has no value. 
B)  the government prevents markets from doing so. 
C)  property rights are not well established for clean air. 
D)  clean air is impossible to produce .

Question 2

Goods that are rival in consumption but not excludable would be considered

Accepted Answer

A)  club goods. 
B)  common resources. 
C)  public goods. 
D)  private goods. 
A)  club goods. 
B)  common resources. 
C)  public goods. 
D)  private goods.

Question 3

In a certain city, the government is considering acquiring some land and turning it into a park (without any fences or gates). In an attempt to determine the extent to which residents of the city would value the park, residents are asked to fill out a questionnaire. Which of the following is correct?

Accepted Answer

A)  On the questionnaire, some residents are likely to exaggerate the value they associate with the park. 
B)  On the questionnaire, some residents are likely to exaggerate the costs they associate with the park. 
C)  The use of such a questionnaire in cost-benefit analysis is likely to produce only rough approximations of residents' perceptions of the costs and benefits of a park. 
D)  All of the above are correct. 
A)  On the questionnaire, some residents are likely to exaggerate the value they associate with the park. 
B)  On the questionnaire, some residents are likely to exaggerate the costs they associate with the park. 
C)  The use of such a questionnaire in cost-benefit analysis is likely to produce only rough approximations of residents' perceptions of the costs and benefits of a park. 
D)  All of the above are correct.

Question 4

Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town meeting, several citizens proposed building a large public swimming pool in the center of town for all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth $50 to each of them. Because the cost to build the swimming pool is only $1,000,000, Manager Miller arranges to have the pool built. Everyone in town enjoys the pool, but when Manager Miller asks for donations to pay for the pool, he only collects $250,000. Manager Miller soon realizes that

Accepted Answer

A)  the survey was conducted improperly. 
B)  the cost of the pool exceeded the social benefits. 
C)  the pool is a club good. 
D)  most residents of the town are probably free-riders at the pool. 
A)  the survey was conducted improperly. 
B)  the cost of the pool exceeded the social benefits. 
C)  the pool is a club good. 
D)  most residents of the town are probably free-riders at the pool.

Question 5

When the value of a human life is calculated according to the economic contribution a person makes to society (as reflected in her income-earning potential), the troubling implication is that

Accepted Answer

A)  it is possible for a retired or disabled person to have no value to society. 
B)  economists are more valuable than entrepreneurs. 
C)  retired people who volunteer in their communities are more valuable than physicians. 
D)  all workers have equal value. 
A)  it is possible for a retired or disabled person to have no value to society. 
B)  economists are more valuable than entrepreneurs. 
C)  retired people who volunteer in their communities are more valuable than physicians. 
D)  all workers have equal value.

Question 6

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 7

When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

Accepted Answer

A) True 
 B)False

Question 8

Figure 11-1
Rival in Consumption?
    
-Refer to Figure 11-1. The box labeled C represents what type of good?

Accepted Answer

Box C repr

Question 9

If one person's use of a good diminishes another person's enjoyment of it, the good is

Accepted Answer

A)  rival in consumption. 
B)  excludable. 
C)  normal. 
D)  exhaustible. 
A)  rival in consumption. 
B)  excludable. 
C)  normal. 
D)  exhaustible.

Question 10

The degradation of the environment from litter is a

Accepted Answer

A)  a negative externality. 
B)  free rider problem. 
C)  Tragedy of the Commons. 
D)  Both a and c are correct. 
A)  a negative externality. 
B)  free rider problem. 
C)  Tragedy of the Commons. 
D)  Both a and c are correct.

Question 11

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 3.5 to 2.9 percent over the life of the system. The city should install the new lighting system if its cost does not exceed

Accepted Answer

A)  $60,000. 
B)  $290,000. 
C)  $350,000. 
D)  $600,000. 
A)  $60,000. 
B)  $290,000. 
C)  $350,000. 
D)  $600,000.

Question 12

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 13

Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. 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 $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield?

Accepted Answer

A)  1 acres 
B)  2 acres 
C)  3 acres 
D)  4 acres 
A)  1 acres 
B)  2 acres 
C)  3 acres 
D)  4 acres

Question 14

Excessive fishing occurs because

Accepted Answer

A)  each individual fisherman has little incentive to maintain the species for the next year. 
B)  fishermen rely on government managers to worry about fish populations. 
C)  fishermen are unionized, so they are not concerned with externalities. 
D)  fishermen have other marketable skills and do not fear exploitation of fish reserves. 
A)  each individual fisherman has little incentive to maintain the species for the next year. 
B)  fishermen rely on government managers to worry about fish populations. 
C)  fishermen are unionized, so they are not concerned with externalities. 
D)  fishermen have other marketable skills and do not fear exploitation of fish reserves.

Question 15

Which of the following is correct regarding road tolls as a way to reduce traffic?

Accepted Answer

A)  They can vary based on the amount of traffic that is present. 
B)  They reduce drivers' explicit cost of driving but increase drivers' implicit cost. 
C)  Some drivers can be made better off, but some drivers will inevitably made worse off. 
D)  They are the solution to the free rider problem that occurs on roads. 
A)  They can vary based on the amount of traffic that is present. 
B)  They reduce drivers' explicit cost of driving but increase drivers' implicit cost. 
C)  Some drivers can be made better off, but some drivers will inevitably made worse off. 
D)  They are the solution to the free rider problem that occurs on roads.

Question 16

Before considering any public project, the government should (i) compare the total cost and total benefits of the project.
(ii) conduct a cost-benefit analysis.
(iii) infer that citizens who vote for a project are willing to pay equally for it.

Accepted Answer

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

Question 17

An absence of property rights often leads to market failure. When this is the case, how does society usually solve the problem?

Accepted Answer

The solution to the problem us

Question 18

Identify the externality that arises when basic research leads to new general knowledge. Is the externality positive or negative?

Accepted Answer

Other people, besides the pers

Question 19

Free goods are usually efficiently allocated without government intervention.

Accepted Answer

A) True 
 B)False

Question 20

A good that is excludable but not rival is known as a club good.

Accepted Answer

A) True 
 B)False

Markets do not ensure that the air we breathe is clean because

Goods that are rival in consumption but not excludable would be considered

When the value of a human life is calculated according to the economic contribution a person makes to society (as reflected in her income-earning potential), the troubling implication is that

When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

Figure 11-1 Rival in Consumption? -Refer to Figure 11-1. The box labeled C represents what type of good?

If one person's use of a good diminishes another person's enjoyment of it, the good is

The degradation of the environment from litter is a

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 3.5 to 2.9 percent over the life of the system. The city should install the new lighting system if its cost does not exceed

Excessive fishing occurs because

Which of the following is correct regarding road tolls as a way to reduce traffic?

Before considering any public project, the government should (i) compare the total cost and total benefits of the project. (ii) conduct a cost-benefit analysis. (iii) infer that citizens who vote for a project are willing to pay equally for it.

An absence of property rights often leads to market failure. When this is the case, how does society usually solve the problem?

Identify the externality that arises when basic research leads to new general knowledge. Is the externality positive or negative?

Free goods are usually efficiently allocated without government intervention.

A good that is excludable but not rival is known as a club good.

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

Filters

Exam 11: Public Goods and Common Resources

Markets do not ensure that the air we breathe is clean because

Goods that are rival in consumption but not excludable would be considered

When the value of a human life is calculated according to the economic contribution a person makes to society (as reflected in her income-earning potential), the troubling implication is that

When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.

Figure 11-1 Rival in Consumption? -Refer to Figure 11-1. The box labeled C represents what type of good?

If one person's use of a good diminishes another person's enjoyment of it, the good is

The degradation of the environment from litter is a

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 3.5 to 2.9 percent over the life of the system. The city should install the new lighting system if its cost does not exceed

Excessive fishing occurs because

Which of the following is correct regarding road tolls as a way to reduce traffic?

Before considering any public project, the government should (i) compare the total cost and total benefits of the project. (ii) conduct a cost-benefit analysis. (iii) infer that citizens who vote for a project are willing to pay equally for it.

An absence of property rights often leads to market failure. When this is the case, how does society usually solve the problem?

Identify the externality that arises when basic research leads to new general knowledge. Is the externality positive or negative?

Free goods are usually efficiently allocated without government intervention.

A good that is excludable but not rival is known as a club good.

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

Filters