Question 1

-Attractive landscaping increases the property values of surrounding homes, creating a marginal benefit. The figure above represents the market for monthly landscaping contracts.
a) What is the marginal social benefit of the 40th contract? Of the 60th contract?
b) What is the marginal private benefit of the 40th contract?
c) What is the marginal external benefit of the 40th contract?
d) What is the unregulated competitive equilibrium price and quantity?
e) What is the efficient quantity?
f) What is the amount of the deadweight loss?

Accepted Answer

The answer of 
-Attractive landscaping increases the property values of...

Question 2

A common resource is ________ and ________.

Accepted Answer

A)  rival; excludable 
B)  nonrival; excludable 
C)  rival; nonexcludable 
D)  nonrival; nonexcludable

Question 3

The free-rider problem is the inability of private markets to achieve the efficient level of production of

Accepted Answer

A)  rival goods. 
B)  excludable goods. 
C)  public goods. 
D)  private goods.

Question 4

-The figure above shows the market for polio vaccination in Africa. Polio vaccination confers an external benefit because one person's vaccination makes it less likely that other people will catch polio.
a) If the market is competitive and left unregulated, how many doses of vaccine will be administered?
b) If the Melinda and Bill Gates Foundation underwrites the cost of the vaccine by paying for a large fraction of the preparation and delivery cost, what will happen to the number of doses administered? Why?

Accepted Answer

The answer of 
-The figure above shows the market for...

Question 5

-Vaccinations provide both private benefits and external benefits. The table above gives information on the marginal private benefit and marginal external benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is $10, then the unregulated competitive equilibrium will have

Accepted Answer

A)  2 million vaccinations. 
B)  3 million vaccinations. 
C)  4 million vaccinations. 
D)  5 million vaccinations.

Question 6

-A city of 50,000 people is considering installing a sewage disposal system. The total fixed cost of the system is $100,000 per month. The marginal benefit to an average city resident from the first thousand gallons of capacity is 1.4 cents. The table shows the relationship between the system's capacity, its total cost, and the marginal benefit received by an average city resident:
a) Draw the marginal social cost curve of the sewage system and the residents' marginal social benefit curve. What is the capacity that achieves maximum net benefit?
b) How much will each person have to pay in taxes to support the efficient capacity level?
c) What is the political equilibrium if voters are well informed?

Accepted Answer

The answer of 
-A city of 50,000 people is considering...

Question 7

Consider a market in which there is an external benefit. A private subsidy paid to producers can be used to arrive at the efficient market equilibrium because the subsidy will

Accepted Answer

A)  increase the quantity produced. 
B)  decrease the supply of the good. 
C)  increase the price demanders pay. 
D)  decrease demand.

Question 8

Which of the following does NOT contain an externality?

Accepted Answer

A)  I sell you an ice cream and you drip it all over the person sitting next to you. 
B)  I sell you an ice cream and it gives you a headache. 
C)  I sell you an ice cream and you share it with your friend. 
D)  I give you an ice cream and you share it with a friend.

Question 9

When consumption is rival and excludable, the product is a

Accepted Answer

A)  public good. 
B)  private good. 
C)  mixed good. 
D)  service, not a good.

Question 10

What are the differences between public goods and private goods?

Accepted Answer

The answer of What are the differences between public goods...

Question 11

-The table above shows the marginal costs and marginal benefits of college education. The marginal private cost of college education at the efficient quantity of enrollment is

Accepted Answer

A)  $8,000 per year. 
B)  $12,000 per year. 
C)  $14,000 per year. 
D)  $16,000 per year.

Question 12

-The graph shows costs and benefits of a mosquito control program, which is a public good:
a) What is the quantity of spraying that achieves efficiency?
b) What is the political equilibrium if voters are well informed?

Accepted Answer

The answer of 
-The graph shows costs and benefits of...

Question 13

Michigan Radio is the state's most listened-to public radio service, attracting approximately 400,000 listeners each week and is funded through listener donations. If Michigan Radio suffers from the free-rider problem then the market would provide an ________ quantity of the public good.

Accepted Answer

A)  efficiently small 
B)  efficiently large 
C)  inefficiently small 
D)  inefficiently large

Question 14

For a public good, the marginal social benefit curve is the ________ summation of all the individual marginal benefit curves. For a private good, the marginal social benefit curve is the ________ summation of all the individual marginal benefit curves.

Accepted Answer

A)  horizontal; vertical 
B)  vertical; horizontal 
C)  vertical; vertical 
D)  horizontal; horizontal

Question 15

In an unregulated competitive market, the presence of marginal external benefit from a good or service results in overproduction.

Accepted Answer

A) True 
 B)False

Question 16

-The above figure shows the marginal private benefit and marginal social cost of a college education. If society's external benefits from college graduates is $10,000 each, then the

Accepted Answer

A)  marginal social cost curve lies $10,000 to the left of the private marginal benefit curve. 
B)  marginal social cost curve lies $10,000 to the right of the private marginal benefit curve. 
C)  marginal social benefit curve lies $10,000 below the private marginal benefit curve. 
D)  marginal social benefit curve lies $10,000 above the private marginal benefit curve.

Exam 16: Public Choices and Public Goods

A common resource is and .