Question 1

The greatest difficulty with cost-benefit analysis of a public project is determining

Accepted Answer

A)  whether government revenue is sufficient to cover the cost of the project. 
B)  which contractor should be awarded the project. 
C)  the cost of the project. 
D)  the value or benefit of the project. 
A)  whether government revenue is sufficient to cover the cost of the project. 
B)  which contractor should be awarded the project. 
C)  the cost of the project. 
D)  the value or benefit of the project.

Question 2

What do clean air in New York City and elephants in Africa have in common?

Accepted Answer

A)  They are both common resources. 
B)  They are both public goods. 
C)  They are both club goods. 
D)  Both are excludable. 
A)  They are both common resources. 
B)  They are both public goods. 
C)  They are both club goods. 
D)  Both are excludable.

Question 3

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 $1,000 per day and the 4 business owners have agreed to split the costs of the ferry trips equally. Which of the following statements is correct?

Accepted Answer

A)  The owner of Restaurant 1 would prefer to have 2 ferry trips. 
B)  The owner of Restaurant 2 would prefer to have 1 ferry trip. 
C)  The owners of Stores A and B would prefer to have 0 trips. 
D)  All of the above are correct. 
A)  The owner of Restaurant 1 would prefer to have 2 ferry trips. 
B)  The owner of Restaurant 2 would prefer to have 1 ferry trip. 
C)  The owners of Stores A and B would prefer to have 0 trips. 
D)  All of the above are correct.

Question 4

Is a tornado siren excludable? Is it rival in consumption? How do we classify a tornado siren in terms of the four types of goods?

Accepted Answer

A tornado siren is n

Question 5

Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common-resource problem.

Accepted Answer

A) True 
 B)False

Question 6

A pair of jeans is rival but non-excludable.

Accepted Answer

A) True 
 B)False

Question 7

If the government decides to build a new highway, the first step would be to conduct a study to determine the value of the project. The study is called a

Accepted Answer

A)  budget analysis. 
B)  project analysis. 
C)  reimbursement analysis. 
D)  cost-benefit analysis. 
A)  budget analysis. 
B)  project analysis. 
C)  reimbursement analysis. 
D)  cost-benefit analysis.

Question 8

Advocates of antipoverty programs believe that fighting poverty

Accepted Answer

A)  can make everyone better off. 
B)  is most successfully accomplished by charities. 
C)  is most efficiently accomplished by the market. 
D)  reduces the well-being of tax payers. 
A)  can make everyone better off. 
B)  is most successfully accomplished by charities. 
C)  is most efficiently accomplished by the market. 
D)  reduces the well-being of tax payers.

Question 9

Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to the state with the understanding that the land will be used as a state beach. Seymour wants an efficient way to prevent overcrowding at the beach, so he should require

Accepted Answer

A)  that all beach visitors pay the same entry fee regardless of the day of the week or time of the year. 
B)  that the beach limit the number of visitors to 500 per day, without an entry fee. 
C)  an entry fee be charged on summer weekend days when many people tend to visit the beach. 
D)  that only local residents be admitted to the beach. 
A)  that all beach visitors pay the same entry fee regardless of the day of the week or time of the year. 
B)  that the beach limit the number of visitors to 500 per day, without an entry fee. 
C)  an entry fee be charged on summer weekend days when many people tend to visit the beach. 
D)  that only local residents be admitted to the beach.

Question 10

The free-rider problem

Accepted Answer

A)  forces the supply of a public good to exceed its demand. 
B)  results in common resources becoming club goods. 
C)  explains why many local governments supply public goods. 
D)  results in public goods becoming private goods. 
A)  forces the supply of a public good to exceed its demand. 
B)  results in common resources becoming club goods. 
C)  explains why many local governments supply public goods. 
D)  results in public goods becoming private goods.

Question 11

A toll collected from each car traveling during rush hour on a congested road is an effective correction to the Tragedy of the Commons for all of the following reasons except the toll provides an incentive for commuters to

Accepted Answer

A)  drive at times other than rush hour. 
B)  use public transit rather than driving. 
C)  drive more fuel-efficient cars. 
D)  car-pool. 
A)  drive at times other than rush hour. 
B)  use public transit rather than driving. 
C)  drive more fuel-efficient cars. 
D)  car-pool.

Question 12

When free riders are present in a market, the market generally fails to provide the efficient outcome.

Accepted Answer

A) True 
 B)False

Question 13

Three business people meet for lunch at an Indian restaurant. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. When the food is delivered to the table, each person faces incentives similar to the

Accepted Answer

A)  consumption of a common resource good. 
B)  production of a public good. 
C)  consumption of a club good. 
D)  production of a private good. 
A)  consumption of a common resource good. 
B)  production of a public good. 
C)  consumption of a club good. 
D)  production of a private good.

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Table 11-4
There are four homes along Belmont Circle, which surrounds a small plot of land. The land currently has no trees, and the 4 homeowners -- Adams, Benitez, Chen, and Davis -- are considering the idea of contributing to a pool of money that will be used to plant up to 4 trees. The table represents their willingness to pay, that is, the maximum amount that each homeowner is willing to contribute toward each tree.  
-Refer to Table 11-4. Suppose the cost to plant each tree is $380 and the 4 homeowners have agreed to split all tree-planting costs equally. Which homeowner(s) would be opposed to planting any trees?

Accepted Answer

A)  only Davis 
B)  only Adams and Davis 
C)  only Adams, Benitez, and Davis 
D)  Adams, Benitez, Chen, and Davis 
A)  only Davis 
B)  only Adams and Davis 
C)  only Adams, Benitez, and Davis 
D)  Adams, Benitez, Chen, and Davis

Question 16

When goods do not have a price, which of the following primarily ensures that the good is produced?

Accepted Answer

A)  buyers 
B)  sellers 
C)  government 
D)  the market 
A)  buyers 
B)  sellers 
C)  government 
D)  the market

Question 17

On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?

Accepted Answer

A)  The lack of a fireworks display in Yankeeville arises because of an externality. 
B)  The lack of a fireworks display in Yankeeville is a case of market failure. 
C)  In deciding not to produce a fireworks display in Yankeeville, private individuals and private firms made decisions that were privately rational but socially inefficient. 
D)  All of the above are correct. 
A)  The lack of a fireworks display in Yankeeville arises because of an externality. 
B)  The lack of a fireworks display in Yankeeville is a case of market failure. 
C)  In deciding not to produce a fireworks display in Yankeeville, private individuals and private firms made decisions that were privately rational but socially inefficient. 
D)  All of the above are correct.

Question 18

Which of the following statements is not correct?

Accepted Answer

A)  Common resources are rival in consumption but are not excludable. 
B)  Uncongested toll roads are examples of club goods. 
C)  When African elephants were privatized, the survival of the species deteriorated. 
D)  National defense is not rival in consumption, nor is it excludable. 
A)  Common resources are rival in consumption but are not excludable. 
B)  Uncongested toll roads are examples of club goods. 
C)  When African elephants were privatized, the survival of the species deteriorated. 
D)  National defense is not rival in consumption, nor is it excludable.

Question 19

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. What is the value of the 39th unit of police protection in Safetyville?

Accepted Answer

A)  $24 
B)  $42 
C)  $54 
D)  $72 
A)  $24 
B)  $42 
C)  $54 
D)  $72

Question 20

Which of the following is an example of the free-rider problem?

Accepted Answer

A)  Both Zoe and Zach receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. 
B)  Alfred receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Alice, is not eligible for the free lunch. 
C)  Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. 
D)  Sam purchases a burger at a fast food restaurant and gets a second burger free because the restaurant is having a buy one, get one free sale. 
A)  Both Zoe and Zach receive low-cost dental care at the local dental school, so neither of them pays the full cost of the care. 
B)  Alfred receives a free lunch from the local "Meals on Wheels" program because of his low monthly income. Yet his next door neighbor, Alice, is not eligible for the free lunch. 
C)  Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. 
D)  Sam purchases a burger at a fast food restaurant and gets a second burger free because the restaurant is having a buy one, get one free sale.

Exam 11: Public Goods and Common Resources

The greatest difficulty with cost-benefit analysis of a public project is determining

What do clean air in New York City and elephants in Africa have in common?

Is a tornado siren excludable? Is it rival in consumption? How do we classify a tornado siren in terms of the four types of goods?

Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common-resource problem.

A pair of jeans is rival but non-excludable.

If the government decides to build a new highway, the first step would be to conduct a study to determine the value of the project. The study is called a

Advocates of antipoverty programs believe that fighting poverty

Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to the state with the understanding that the land will be used as a state beach. Seymour wants an efficient way to prevent overcrowding at the beach, so he should require

The free-rider problem

A toll collected from each car traveling during rush hour on a congested road is an effective correction to the Tragedy of the Commons for all of the following reasons except the toll provides an incentive for commuters to

When free riders are present in a market, the market generally fails to provide the efficient outcome.

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.

When goods do not have a price, which of the following primarily ensures that the good is produced?

On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though it would be efficient for such a display to be produced. Which of the following statements is correct?

Which of the following statements is not correct?

Which of the following is an example of the free-rider problem?

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

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