Question 1

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 2

The phenomenon of free riding is most closely associated with which type of good?

Accepted Answer

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

Question 3

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. On these days, electricity is

Accepted Answer

A)  excludable, but nonrival in consumption. 
B)  not excludable, but rival in consumption. 
C)  excludable and rival in consumption. 
D)  not excludable and nonrival in consumption. 
A)  excludable, but nonrival in consumption. 
B)  not excludable, but rival in consumption. 
C)  excludable and rival in consumption. 
D)  not excludable and nonrival in consumption.

Question 4

Both private goods and club goods are

Accepted Answer

A)  rival in consumption. 
B)  nonrival in consumption. 
C)  excludable. 
D)  nonexcludable. 
A)  rival in consumption. 
B)  nonrival in consumption. 
C)  excludable. 
D)  nonexcludable.

Question 5

Although national defense is currently a public good, economists who advocate small government generally agree that the U.S. should privatize national defense to increase the efficiency of the good.

Accepted Answer

A) True 
 B)False

Question 6

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?

Accepted Answer

The government assigns and protects the

Question 7

A cost-benefit analysis of a highway is difficult to conduct because analysts

Accepted Answer

A)  cannot estimate the explicit cost of a project that has not been completed. 
B)  are unlikely to have access to costs on similar projects. 
C)  are not able to consider the opportunity cost of resources. 
D)  will have difficulty estimating the value of the highway. 
A)  cannot estimate the explicit cost of a project that has not been completed. 
B)  are unlikely to have access to costs on similar projects. 
C)  are not able to consider the opportunity cost of resources. 
D)  will have difficulty estimating the value of the highway.

Question 8

Figure 11-1
Rival in Consumption?
Yes No
Excludable? S1U1P1YesS1S1P0     No
-Refer to Figure 11-1. For which two boxes is it the case that externalities arise because something of value has no price attached to it?

Accepted Answer

A)  Box A and Box B 
B)  Box A and Box C 
C)  Box B and Box D 
D)  Box C and Box D 
A)  Box A and Box B 
B)  Box A and Box C 
C)  Box B and Box D 
D)  Box C and Box D

Question 9

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 10

Figure 11-1
Rival in Consumption?
Yes No
Excludable? S1U1P1YesS1S1P0     No
-Refer to Figure 11-1. A gym membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 11

Table 11-5
A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip.  
-Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750. Then total surplus for the 4 business owners is

Accepted Answer

A)  $330 if there is 1 ferry trip. 
B)  $370 if there are 2 ferry trips. 
C)  $150 if there are 3 ferry trips. 
D)  All of the above are correct. 
A)  $330 if there is 1 ferry trip. 
B)  $370 if there are 2 ferry trips. 
C)  $150 if there are 3 ferry trips. 
D)  All of the above are correct.

Question 12

A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the Atlantic waters south of Cape Cod based on a study of the lobster population. Which of the following statements is not correct?

Accepted Answer

A)  Lobsters are rival but not excludable. 
B)  The lobster population is an example of the tragedy of the commons. 
C)  Reducing the quota on the number of lobsters any fisher can catch would have a protective effect on the lobster population. 
D)  If left unregulated, the lobster population will likely increase. 
A)  Lobsters are rival but not excludable. 
B)  The lobster population is an example of the tragedy of the commons. 
C)  Reducing the quota on the number of lobsters any fisher can catch would have a protective effect on the lobster population. 
D)  If left unregulated, the lobster population will likely increase.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Figure 11-1
Rival in Consumption?
Yes No
Excludable? Yes     No
-Refer to Figure 11-1. The box labeled B represents what type of good?

Accepted Answer

Box B repr

Question 15

The failure of markets to adequately protect the environment can viewed either as a problem of

Accepted Answer

A)  externalities or as a problem of common resources. 
B)  externalities or as a problem of private goods. 
C)  the overprovision of public goods or as a problem of the underprovision of private goods. 
D)  club goods or as a problem that arises when the quantity of excludable goods exceeds the socially-efficient quantity. 
A)  externalities or as a problem of common resources. 
B)  externalities or as a problem of private goods. 
C)  the overprovision of public goods or as a problem of the underprovision of private goods. 
D)  club goods or as a problem that arises when the quantity of excludable goods exceeds the socially-efficient quantity.

Question 16

Excludability is the property of a good whereby

Accepted Answer

A)  one person's use diminishes other peoples' use. 
B)  a person can be prevented from using it. 
C)  the government rations the quantity of a good that is available. 
D)  the resource is congestible. 
A)  one person's use diminishes other peoples' use. 
B)  a person can be prevented from using it. 
C)  the government rations the quantity of a good that is available. 
D)  the resource is congestible.

Question 17

Table 11-3
This table describes the police protection demands for three equal sized groups of people in Safetyville. The second, third, and fourth columns show the number of person-hours of police protection per day that a group will demand for a given price (the first column).  
-Refer to Table 11-3. If the marginal cost of police protection is constant at $72 per person-hour, what is the efficient level of police protection to provide?

Accepted Answer

A)  9 person-hours 
B)  18 person-hours 
C)  39 person-hours 
D)  66 person-hours 
A)  9 person-hours 
B)  18 person-hours 
C)  39 person-hours 
D)  66 person-hours

Question 18

One solution to the "Tragedy of the Commons" is to turn the common resource into a private good.

Accepted Answer

A) True 
 B)False

Question 19

A town engineer comes to the city council with a proposal to install a traffic light at a certain intersection that currently has a stop sign. The benefit of the traffic light is increased safety because the light will reduce the incidence of fatal traffic accidents by 50 percent per year. Which of the following statements is correct?

Accepted Answer

A)  The city council should vote to install the traffic light because the benefits will outweigh the costs. 
B)  The city council should carefully evaluate the benefits of reduced fatalities against only the explicit costs of the light. 
C)  The city council should carefully evaluate the benefits of reduced fatalities against the costs of the light and of the extra time that drivers will spend waiting for a green light. 
D)  The costs will invariably outweigh the benefits. 
A)  The city council should vote to install the traffic light because the benefits will outweigh the costs. 
B)  The city council should carefully evaluate the benefits of reduced fatalities against only the explicit costs of the light. 
C)  The city council should carefully evaluate the benefits of reduced fatalities against the costs of the light and of the extra time that drivers will spend waiting for a green light. 
D)  The costs will invariably outweigh the benefits.

Question 20

One way to eliminate the Tragedy of the Commons is to

Accepted Answer

A)  increase law enforcement in public areas. 
B)  limit access to the commons. 
C)  increase access to the commons. 
D)  decrease taxes. 
A)  increase law enforcement in public areas. 
B)  limit access to the commons. 
C)  increase access to the commons. 
D)  decrease taxes.

Exam 11: Public Goods and Common Resources

Excessive fishing occurs because

The phenomenon of free riding is most closely associated with which type of good?

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. On these days, electricity is

Both private goods and club goods are

Although national defense is currently a public good, economists who advocate small government generally agree that the U.S. should privatize national defense to increase the efficiency of the good.

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?

A cost-benefit analysis of a highway is difficult to conduct because analysts

Figure 11-1 Rival in Consumption? Yes No Excludable? Yes No -Refer to Figure 11-1. For which two boxes is it the case that externalities arise because something of value has no price attached to it?

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

Figure 11-1 Rival in Consumption? Yes No Excludable? Yes No -Refer to Figure 11-1. A gym membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box

A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the Atlantic waters south of Cape Cod based on a study of the lobster population. Which of the following statements is not correct?

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

Figure 11-1 Rival in Consumption? Yes No Excludable? Yes No -Refer to Figure 11-1. The box labeled B represents what type of good?

The failure of markets to adequately protect the environment can viewed either as a problem of

Excludability is the property of a good whereby

One solution to the "Tragedy of the Commons" is to turn the common resource into a private good.

One way to eliminate the Tragedy of the Commons is to

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

Six Debates Over Macroeconomic Policy

Filters

Figure 11-1 Rival in Consumption? Yes No Excludable? ^Yes No -Refer to Figure 11-1. For which two boxes is it the case that externalities arise because something of value has no price attached to it?

Figure 11-1 Rival in Consumption? Yes No Excludable? ^Yes No -Refer to Figure 11-1. A gym membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box