Question 1

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

Accepted Answer

A)   a fireworks display in a town with many residents
B)   national defense
C)   general knowledge
D)   a lighthouse D

Question 2

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 $900. How many streetlights should the town install to maximize total surplus from the streetlights?

Accepted Answer

A)   1 streetlight
B)   2 streetlights
C)   3 streetlights
D)   4 streetlights B

Question 3

The Occupational Safety and Health Administration (OSHA) has determined that 100 workers are exposed to a hazardous chemical used in the production of diet soft drinks. The cost of imposing a regulation that would ban the chemical is $10 million. OSHA has calculated that each person saved by this regulation has a value equal to $10 million. If the benefits are exactly equal to the costs, what probability is OSHA using to assess the likelihood of a fatality from exposure to this chemical?

Accepted Answer

A)   0.001
B)   0.01
C)   0.1
D)   1.0 B

Question 4

Why do elephants face the threat of extinction while cows do not?

Accepted Answer

A)   Cattle are a valuable source of income for many people, while elephants have no market value.
B)   There is a high demand for products that come from cows, whereas there is no demand for products that come from elephants.
C)   There are still lots of cattle that roam free, while all elephants live in zoos.
D)   Cattle are owned by ranchers, while elephants are owned by no one.

Question 5

Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.
 
-Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Amber receive?

Accepted Answer

A)   $0
B)   $26
C)   $32
D)   $56

Question 6

National defense is a classic example of a public good because

Accepted Answer

A)   there is no market for private security services.
B)   it is difficult to exclude people from receiving the benefits from national defense once it is provided.
C)   everyone agrees that some level of national defense is important, but only the government knows the optimal amount.
D)   there are no private firms willing to supply defense goods such as tanks and weapons.

Question 7

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?

Accepted Answer

A)   -$80
B)   $320
C)   $360
D)   $480

Question 8

London drivers who choose to drive in "congestion zones" pay a tax designed to reduce traffic congestion.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

If no one can be prevented from using good x, then good x is one of two types of goods. What are those two types?

Accepted Answer

The answer of If no one can be prevented from...

Question 11

Which city currently charges drivers a "congestion toll" to drive into the heart of the city's financial, legal, and entertainment district?

Accepted Answer

A)   Washington, D.C.
B)   Sydney
C)   Tokyo
D)   London

Question 12

In a cost-benefit analysis, the value of a human life is sometimes calculated on the basis of

Accepted Answer

A)   the risks that a person voluntarily exposes herself to in her job and/or recreational choices.
B)   the value of each individual's assets.
C)   the belief that human life is priceless.
D)   the amount of resources required to adequately sustain life.

Question 13

Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.
 
-Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build?

Accepted Answer

A)   0 acres
B)   1 acre
C)   2 acres
D)   3 acres

Question 14

Figure 11-1
Rival in Consumption?
  
-Refer to Figure 11-1. The box labeled A represents what type of good?

Accepted Answer

The answer of Figure 11-1
Rival in Consumption?
  
-Refer to...

Question 15

Congressman Smith and Congresswoman Johnson both consider themselves advocates for the national parks and are introducing different bills designed to benefit the parks. Congressman Smith's bill calls for an increase in the entrance fees. Congresswoman Johnson's bill calls for a decrease in the entrance fees. Which of the bills would be more effective at ensuring the quality of the national parks?

Accepted Answer

A)   Congressman Smith's bill because it will reduce the overuse of the parks
B)   Congresswoman Johnson's bill because more visitors means more citizens will value and care for the parks
C)   Both bills would be equally effective.
D)   Neither bill would be effective.

Question 16

The provision of a public good generates a

Accepted Answer

A)   positive externality, as does the use of a common resource.
B)   positive externality and the use of a common resource generates a negative externality.
C)   negative externality, as does the use of a common resource.
D)   negative externality and the use of a common resource generates a positive externality.

Question 17

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.

Question 18

In what way do public goods give rise to positive externalities?

Accepted Answer

The answer of In what way do public goods give...

Question 19

Scenario 11-3
Consider the following goods:
-a fish fillet served at a restaurant
-fish in the ocean
-exotic fish in a huge aquarium in a privately-owned building
-Refer to Scenario 11-3. Which of these goods is the best example of a common resource? Briefly explain.

Accepted Answer

The answer of Scenario 11-3
Consider the following goods:
-a fish fillet...

Question 20

It is common knowledge that many U.S. national parks have become overused. One possible solution to this problem is to

Accepted Answer

A)   increase entrance fees.
B)   decrease camping permit fees.
C)   require all visitors to register upon entering the park.
D)   sell the land that the parks currently occupy.

Exam 11: Public Goods and Common Resources

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