Deck 15: Public Goods and Public Choice

Question 1

In the absence of government,an underallocation of resources generally exists for

A) goods with external costs.
B) imported goods and services.
C) public goods.
D) all of the above

Answer 1

public goods.

Question 2

Which of the following would be an example of an external benefit?

A) More people start to ride the bus and as a result air pollution is reduced.
B) Firms are able to reduce their costs of production by using a more efficient technology.
C) The government requires polluting firms to pay a special tax.
D) A firm has just gotten permission to open a landfill on property that is adjacent to your home.

Answer 2

More people start to ride the bus and as a result air pollution is reduced.

Question 3

Goods that are nonrival in consumption and that have benefits that are nonexcludable are

A) private goods.
B) neighbor effects.
C) public goods.
D) none of the above

Answer 3

public goods.

Question 4

Private goods are

A) rival in consumption and their benefits are excludable.
B) nonrival in consumption and their benefits are excludable.
C) nonrival in consumption and their benefits are nonexcludable.
D) rival in consumption and their benefits are nonexcludable.

Question 5

Sirens located around a town to warn citizens of the approach of a tornado are an example of

A) an external cost.
B) a private good.
C) a common resource.
D) a public good.

Question 6

When Chris buys pizza for his football party and he gets to decide who will have a slice of his pizza.This means his pizza is

A) nonrival and nonexcludable.
B) a private good.
C) a public good.
D) rival, but nonexcludable.

Question 7

Which of the following is NOT an example of a public good?

A) a two-tiered deck
B) an urban park
C) a lighthouse.
D) clean air

Question 8

Which of the following contains most of the characteristics of a public good?

A) education
B) trash collection
C) public transportation
D) fireworks shows

Question 9

Which of the following situations contains most of the characteristics of a private good?

A) free bread handed out by the government
B) an apartment in a public housing project
C) a hamburger
D) all of the above

Question 10

Public goods

A) have nonexcludable benefits.
B) are not subject to the free-rider problem.
C) are rival goods.
D) all of the above

Question 11

Which of the following is true concerning public goods?

A) One person's enjoyment of a public good reduces another person's enjoyment from the same public good.
B) People cannot be prevented from enjoying a public good.
C) Public goods can be produced and patented by individuals.
D) none of the above

Question 12

Public goods are

A) rival in consumption and their benefits are excludable.
B) nonrival in consumption and their benefits are excludable.
C) nonrival in consumption and their benefits are nonexcludable.
D) rival in consumption and their benefits are nonexcludable.

Question 13

Which of the following would NOT be considered to be a public good?

A) national defense
B) radio broadcasts
C) police protection
D) a newspaper

Question 14

Which of the following is true?

A) Public goods are generally paid for by voluntary contributions.
B) Public goods are generally paid for by the government with tax revenues.
C) Private goods will not be produced in the private market.
D) none of the above

Question 15

Which of the following would be typically classified as a public good?

A) postal delivery
B) national defense
C) toll roads
D) college education

Question 16

In the absence of government involvement,the problem that public goods impose on a market system is that

A) too little of the good is produced.
B) too much of the good is produced.
C) resources are wasted in the production of public goods.
D) firms will earn large profits when producing these goods.

Question 17

A harbor lighthouse that guides approaching ships is an example of

A) a public good.
B) a private good.
C) a monopoly.
D) a good that is rival.

Question 18

A good is nonrival in consumption when it

A) has either positive or negative external costs.
B) is priced at its marginal cost.
C) can be enjoyed by one person without that interfering with another's consumption.
D) is nonexcludable.

Question 19

Public goods and services are

A) generally paid for voluntarily by private individuals.
B) always produced and sold in the private market.
C) generally subject to quotas.
D) generally paid for with tax revenues.

Question 20

What distinguishes a public good from a private good?

A) Public goods are subject to the free-rider problem.
B) Private goods are never produced by the government.
C) Public goods are excludable, but nonrival.
D) Private goods will not be produced in private markets unless the government is involved.

Question 21

The problem with using voluntary contributions to support a public good is known as the ________ problem.

A) user
B) utility
C) free-rider
D) external cost

Question 22

Suppose that during the pledge drive in October,the local public radio station gives contributors a free subscription to its daily newsletters in return for their monetary contribution.This gift will likely

A) lower the amount of voluntary contributions the station receives.
B) help the station overcome the free-rider problem.
C) cost the station more than the value of the benefit.
D) all of the above

Question 23

Every good or service that comes from the government is automatically considered a public good.

Question 24

Suppose it is that time of the year for the National Public radio station to invite every listener to pledge and support the station.Donna is a daily listener and decides to wait for others to contribute and support the station.Meanwhile,she continues to get the benefit of public broadcasting.This is an example of the

A) public good problem.
B) free-rider problem.
C) rival in consumption problem.
D) drop-in-the-bucket problem.

Question 25

Because people can enjoy the benefits of public goods whether they pay for them or not,they are usually unwilling to pay for them.This is known as the

A) drop-in-the-bucket problem.
B) nonexcludable problem.
C) nonrival problem.
D) free-rider problem.

Question 26

The private market does NOT provide national defense because

A) the resources needed to provide national defense are not available in the private market.
B) the fixed cost of providing national defense is too high.
C) it is impossible to prevent anyone from enjoying the benefit of national defense.
D) it is an excludable and rival good.

Question 27

A group of volunteers from a top corporation participate in a volunteer program to rebuild a local playground.Among the 20 people that show up to help rebuild the playground,there are two individuals that just talk to each other and,unlike the rest of the people,do not do any work.At the end of the day,the entire group takes credit for the renovated project.How do you best describe this situation with the volunteer program to rebuild a local playground?

A) The incentive to help others is high.
B) The two workers were free riding on the hard work of the others in the group who did work.
C) The two individuals impose an external cost on other members of the group.
D) none of the above

Question 28

The ________ problem of public goods occurs because people can enjoy the benefits of these goods even when they do not have to pay for them.

A) moral hazard
B) free-hand
C) free-rider
D) external cost

Question 29

Free riding is a problem with public goods but not with private goods,because for the private good

A) the good is rival.
B) the marginal cost of production is greater than zero.
C) the good is excludable.
D) the good is free.

Question 30

For public goods,an external benefit occurs because

A) the goods are overvalued by society.
B) they provide total benefits that are greater than their costs, but smaller than the personal benefit of each individual.
C) they are rival.
D) none of the above

Question 31

Public goods are land,labor,and capital resources provided by households in return for payments from the government.

Question 32

What defines a situation where a person consumes a good without having to pay for it?

A) the rival problem
B) the rival in consumption problem
C) the free-rider problem
D) the nonrival in consumption problem

Question 33

A free rider is a person who

A) does not maximize utility.
B) enjoys something only if he pays for it.
C) acts irrationally.
D) enjoys something without paying for it.

Question 34

Which of the following is NOT a way to overcome the free-rider problem?

A) offer contributors private goods in return
B) arrange for matching contributions
C) have the government "volunteer" a wealthy person to pay for it by lottery
D) appeal to the individual's sense of civic or moral responsibility

Question 35

The government is able to use its taxing power to provide a good that would otherwise not be provided.

Question 36

Recall the Application about space debris in the atmosphere to answer the following question(s).
Recall the Application.The clearing of space debris is a public good that is subject to

A) rivalry and excludability.
B) the free-rider problem.
C) the median-voter problem.
D) external benefits, but not external costs.

Question 37

Due to the existence of external benefits associated with public goods,

A) private markets will lead to an efficient allocation of resources.
B) government intervention can possibly improve on private market outcomes.
C) private markets will correct for the underproduction of the good.
D) the free-rider problem is eliminated.

Question 38

Recall the Application about space debris in the atmosphere to answer the following question(s).
Recall the Application.What kind of problem does global weather observation face?

A) Information gathered by one country is nonrival and therefore produces a free rider problem.
B) No single organization gathers all the information to reveal the big weather picture.
C) Some parts of the world received little to no monitoring.
D) all of the above

Question 39

The protection of the earth's ozone layer is an example of a public good.

Question 40

The free-rider problem arises

A) when people feel their contribution is so small relative to the total amount needed that it won't make a difference whether they contribute or not.
B) when people realize they will still receive the benefits of a good whether they pay for it or not.
C) whenever the government produces a good or service.
D) whenever there is a surplus of the product in the market.

Question 41

Give an example of a public good.Explain what characteristics make this good a public good.

Question 42

An individual would choose the number of news articles to read based on her

A) marginal social benefit and marginal private cost.
B) total private benefits and the social benefit.
C) marginal social benefit and the marginal social cost.
D) marginal private benefit and marginal cost.

Question 43

All goods that have social value will be profitable for firms in the private sector to produce.

Question 44

Suppose Patty has a house in a good neighborhood in Philadelphia.She decides to have the exterior of her house painted and the windows replaced.After the work is completed,her house has appreciated in value and has also helped her neighbors' houses to go up in value.This is an example of a

A) public good with external benefits.
B) private good with external benefits.
C) public good without external benefits.
D) private good without external benefits.

Question 45

Explain the difference between private and public goods.

Question 46

Education generates external benefits.A free market with no government intervention will produce

A) an efficient level of education.
B) more than the efficient level of education.
C) less than the efficient level of education.
D) zero units of education.

Question 47

List three ways in which an organization can overcome the free-rider problem.

Question 48

Food stamps handed out to the needy by the government are an example of a public good.

Question 49

What is a public good?

Question 50

When one person benefits from national defense,he or she reduces the benefit to others.

Question 51

The free-rider problem is a problem intrinsic to public goods; the good or service is usually so costly that its provision generally does not depend on whether or not any single person pays.

Question 52

Explain the free-rider problem.

Question 53

If Paul improves the landscape of the house by planting new grass,trimming the trees,and adding a fence,making the value of his house go up,which the following will happen?

A) Paul will be less happy because of the money he spent on his improvements.
B) The neighbors will receive external benefits.
C) The neighbors will also be forced to improve their houses.
D) The marginal social benefit will be less than the marginal cost.

Question 54

If there are external benefits associated with education,then

A) the social benefit exceeds the private benefit.
B) the private benefit exceeds the social benefit.
C) the social benefit equals the private benefit.
D) None of the above are true.

Question 55

Giving contributors a small gift is one way to overcome the free-rider problem.

Question 56

List the two characteristics that define a public good.

Question 57

Give an example of an external benefit and explain why the outcome is inefficient.

Question 58

If the production of a good generates external benefits,the government could increase efficiency by

A) taxing the production of the good to reduce the amount produced.
B) subsidizing the production of the good to increase the amount produced.
C) regulating the production of the good to reduce the amount produced.
D) requiring all producers of the product to be licensed to produce the product.

Question 59

The free-rider problem arises when the number of individuals who can benefit is large and exclusion of most of them is possible.

Question 60

Which of the following statements about education is true?

A) Education is a private good with external benefits like improved civic responsibilities.
B) Education is a public good and improves workplace performance.
C) Education is a public good that decreases government activities.
D) Education is a private good that only benefits the student.

Question 61

Self-interest theory of government

A) is a way for the government to impose its will.
B) is the power of the government to overrule its citizen without their consent.
C) explains why voters might establish implicit boundaries of government spending and taxes.
D) explains why voters might establish explicit limits of government spending and taxes.

Question 62

The median-voter rule suggests that

A) politicians try to fool all of the voters all of the time.
B) politicians decide how to vote on an issue by looking at how other politicians will vote.
C) politicians often choose a position that reflects the preferences of the median voter.
D) politicians try to ensure that the services provided by the government are distributed equally across voters.

Question 63

The government can offer a subsidy that encourages people to seek more education.

Question 64

Due to crime externalities,a more educated society tends to have a lower level of crime.

Question 65

The model of government based on small groups of people manipulating government for their own gain is

A) conservative ideology.
B) median-voter policy.
C) special-interest politics.
D) common resource strategy.

Question 66

Why might a politician start a costly spending program if its costs exceed its social benefits?

A) The politician is trying to find ways to raise more money for the next election.
B) The politician gains prestige and voters are not well informed of the benefits and costs.
C) Voters do not care about the costs of programs, as long as their taxes do not go up.
D) The costs cannot be measured therefore the politicians focus on the benefits which are explicit.

Question 67

Recall the Application about the benefits provided by the LoJack auto recovery system to answer the following question(s).
Recall the Application.Who are the recipients of the external benefits generated by LoJack?

A) the purchasers of the LoJack system
B) the producers of the LoJack system
C) the owners of cars that do not have the LoJack system
D) the insurance companies that offer discounts to LoJack purchasers

Question 68

List and explain some of the external benefits generated by education.

Question 69

Recall the Application about the value of trees in residential neighborhoods to answer the following question(s).
According to the Application,a mature tree adds about ________ to the value of an owner's house and generates a total external benefit of $13,000 for neighboring houses.

A) $0
B) $4,500
C) $7,000
D) $13,000

Question 70

The purchase of fire extinguishers by apartment dwellers provides benefits to their neighbors.Explain why this situation leads to an inefficient outcome.

Question 71

Recall the Application about the benefits provided by the LoJack auto recovery system to answer the following question(s).
Recall the Application.Which of the following is NOT a benefit from the LoJack system?

A) more stolen cars recovered
B) more police being hired
C) lower insurance costs
D) fewer automobile thefts

Question 72

The median voter group is

A) a special interest group.
B) a group of voters who express their opinions in television and radio advertisements.
C) the large group of voters in the middle of the political spectrum.
D) all of the above

Question 73

In a two-party democratic system,individuals running for office typically

A) appeal to the "right-wing" voters in society.
B) appeal to the "middle-of-the-road" voters in society.
C) do what they think will weaken the other party long term.
D) tell the voters the truth.

Question 74

If education results in external benefits,the government could subsidize education to lead the market to an inefficient level of output.

Question 75

Education produces only public benefits while costing society billions of dollars.

Question 76

Activities that provide external benefits

A) should be taxed so that the recipients of the benefits pay for them; otherwise inefficiency will result.
B) may be subsidized by the government to give decision makers an incentive to consider increasing their consumption.
C) will not result in inefficiency if those benefits are not considered.
D) all of the above

Question 77

The marginal social benefit of an activity equals its marginal private benefit plus its marginal external benefit.

Question 78

Public-choice economics is

A) the vote of every politician with respect to economics.
B) the right of every citizen to know about the economic status of his/her country.
C) the field that uses models of rational choice to study how governments operate.
D) none of the above

Question 79

Recall the Application about the value of trees in residential neighborhoods to answer the following question(s).
Recall the Application.The benefits from planting trees in residential neighborhoods,including improved air quality and aesthetics,go to ________.This implies that trees provide both private and social benefits.

A) the property owners but not the neighbors
B) the neighbors but not the property owners
C) the property owner as well as the neighbors
D) neither the property owners nor the neighbors

Question 80

When there are external costs,the government can encourage people to take action that benefit other people.