Question 1

Goods that are excludable include both

Accepted Answer

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

Question 2

Governments can grant private property rights over resources that were previously viewed as public,such as fish or elephants.Why would governments want to do so?

Accepted Answer

A)  to prevent overuse 
B)  to decrease taxes 
C)  to fight poverty 
D)  to increase consumption

Question 3

Both private goods and club goods are

Accepted Answer

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

Question 4

When a good is rival in consumption,

Accepted Answer

A)  one person's use of the good diminishes another person's ability to use it. 
B)  people can be prevented from using the good. 
C)  an unlimited number of people can use the good at the same time. 
D)  everyone will be excluded from obtaining the good.

Question 5

Which of the following statements is correct?

Accepted Answer

A)  The establishment of property rights sometimes gives rise to market failure. 
B)  The absence of property rights sometimes gives rise to market failure. 
C)  In the context of public goods,the Coase theorem implies that total surplus in some markets can be improved by the elimination of property rights. 
D)  Government regulation of private behavior,in response to market failure,can never improve social well-being.

Question 6

Private goods are both

Accepted Answer

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

Question 7

Which of the following would not be considered a private good?

Accepted Answer

A)  a sweater 
B)  a slice of pizza 
C)  a Toyota Prius 
D)  cable TV service

Question 8

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.

Question 9

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 10

Table 11-5
A small strip mall contains four retail stores,and crime has recently been on the increase in the neighborhood of the strip mall.The owners of the four stores - Stores A,B,C,and D - are considering contributing to a pool of money that will be used to hire up to 4 security guards.The table represents their willingness to pay,that is,the maximum amount that each store owner is willing to contribute,per day,to hire each security guard.
 
-Refer to Table 11-5.Suppose the cost to hire each guard is $120 per day and the 4 store owners have agreed to split the costs of hiring guards equally.How many guards would the owner of Store A prefer to hire?

Accepted Answer

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

Question 11

Suppose that everyone prefers to live in a society without poverty.Further suppose that some private charities are successful in reducing poverty.People who do not contribute to the charities

Accepted Answer

A)  receive no external benefit from private antipoverty programs. 
B)  decrease the reliance of individuals on antipoverty programs. 
C)  can free ride on the generosity of others. 
D)  are most likely to be in favor of government-sponsored programs.

Question 12

A free rider is a person who

Accepted Answer

A)  will only purchase a product on sale. 
B)  receives the benefit of a good but avoids paying for it. 
C)  can produce a good at no cost. 
D)  rides public transit regularly.

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
 
-Refer to Figure 11-1.The box labeled B represents

Accepted Answer

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

Question 15

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.

Question 16

You and your friends eat potato chips in your bedroom.For you and your friends,the potato chips are rival in consumption.

Accepted Answer

A) True 
 B)False

Question 17

Why has the value of ivory threatened the extinction of the elephant,whereas the value of beef has enhanced the survival of the cow?

Accepted Answer

A)  Cows are a common resource,whereas elephants are owned by governments. 
B)  Elephants are larger than cows,requiring more economic resources. 
C)  Elephants live in Africa,where economic resources are scarce. 
D)  Elephants are a common resource,whereas cows are privately owned.

Question 18

When a free-rider problem exists,

Accepted Answer

A)  the market will devote too few resources to the production of the good. 
B)  the cost of the good will always be more than the benefit of the good. 
C)  the good will not be produced. 
D)  entrepreneurs will eventually find a way to make free-riders pay their share.

Question 19

You are the mayor of a town with 20,000 residents.The head of your economic development agency recently conducted a survey in which the 20,000 residents said that a small public library in the center of town would be worth $40 to each of them.Because the cost to build the library is only $500,000,you arrange to have the library built.Everyone in town enjoys the library,but when you asked for donations to pay for the library,you only collected $100,000.You are convinced that

Accepted Answer

A)  the survey must have overstated how much the library was worth to each resident; otherwise,you would have collected $500,000 in donations. 
B)  the cost of the library exceeded the social benefits. 
C)  the library was an example of the Tragedy of the Commons. 
D)  most residents of the town are probably free-riders at the library.

Question 20

The Tragedy of the Commons occurs because

Accepted Answer

A)  government property is most heavily used by the wealthy. 
B)  everyone deserves an equal share of government property. 
C)  social and private incentives differ. 
D)  established property rights create competition.

Exam 11: Public Goods and Common Resources