Exam 11: Public Goods and Common Resources

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 $900 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?"

Which of the following statements is correct?

Market failure associated with the free-rider problem is a result of

Goods that are rival in consumption and excludable would be considered

When a free-rider problem exists,

What do we mean when we say that a good is excludable?

Even economists who advocate small government agree that national defense is a good that the government should provide.

The mayor of Newton is considering proposals to deal with an unsafe intersection. She could install a traffic light at a cost of $50,000 or she could install stop signs at a cost of $5,000. The traffic light is expected to reduce the risk of fatality by 0.45 percent and the stop signs are expected to reduce the risk of fatality by 0.054 percent. If the value of human life is estimated to be $10 million, what choice should the mayor make? Briefly explain.

Suppose that installing an overhead pedestrian walkway would cost a college town $150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million. The town should

Figure 11-1 -Refer to Figure 11-1. The box labeled B represents

Which of the following goods is the best example of a public good?

A neighborhood voted to develop a vacant lot into a vegetable garden. All of the neighbors worked the land and sowed the seeds. A few neighbors picked and ate the produce before the other neighbors had a chance. Which of the following could solve this example of the Tragedy of the Commons?

If the use of a common resource is not regulated,

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

In some cases the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide.

When a good does not have a attached to it, private markets fail to ensure that the good is produced and consumed in the proper amounts.

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that

Most goods in the economy are

The parable called the Tragedy of the Commons applies to goods such as

Producers have little incentive to produce a public good because