Exam 11: Public Goods and Common Resources

Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that

If good x is available free of charge, then

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?

What is the main difficulty facing cost-benefit analysts when they attempt to evaluate the worthiness of proposed public projects?

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

Place each of the following in the correct location in the table. a. Congested toll roads b. Knowledge c. Fish in the ocean d. National defense e. Congested nontoll roads f. Cable TV g. The environment h. Fire protection i. Ice-cream cones j. Uncongested toll roads k. Clothing l. Uncongested nontoll roads

Pete is a non-union employee at The Electric Co. The majority of the employees at The Electric Co. are unionized. The union at The Electric Co. has negotiated very good benefits. Even though he is not a union member and he does not have to pay union dues, Pete receives all the benefits that the union has negotiated. Pete's behavior is an example of

A free rider is a person who

Consider a public road that anyone is allowed to drive on. If the road is often congested, the road would be considered a

Scenario 11-2 Consider the following goods: • fire-protection services provided by a fire department • a beautiful mural on the outside wall of a fire station • a firefighter's helmet -Refer to Scenario 11-2. Which of these goods is the best example of a club good? Briefly explain.

When good X is produced, some people benefit. A free-rider problem arises when

Figure 11-1 -Refer to Figure 11-1. Which of the following items is not an example of the type of good represented by Box D?

The creation of knowledge is a public good. Because knowledge is a public good, profit-seeking firms tend to free- ride on the knowledge created by others and, as a result, devote too few resources to the creation of knowledge. How does the U.S. government correct for this apparent market failure?

The profit motive that stems from private ownership means that elephant populations are best protected as 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 $360 and the families have agreed to split the cost of installing the streetlights equally. If the residents choose to install the number of streetlights that will maximize total surplus from the streetlights, how much total surplus will the Greene family receive?

Cost-benefit analysis is important to determine the role of government in our economy because

If the use of a common resource is not regulated,

The free-rider problem

Figure 11-1 -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

Under which of the following scenarios would a park be considered a club good?