Graded Homework - Chapter 17

(Problem 13c). A residential community has 100 residents who are concerned about security. The accompanying table gives the total cost of hiring a 24-hour security service as well as each individual resident's total benefit. If an individual resident were to decide about hiring and paying for security guards on his or her own, how many guards would that resident hire? A. 2 B. 0 C. 3 D. 1

B. 0

4. Figure: Market Failure Reference: Ref 17-12 (Figure: Market Failure) In the figure Market Failure, where is the equilibrium for a competitive market? H I K J

K

(Problem 5a). Anyone with a radio receiver can listen to public radio, which is funded largely by donations. Is public radio excludable or nonexcludable? Is it rival in consumption or nonrival? What type of good is it? The marginal social benefit is decreasing: the marginal social cost is increasing. A. Nonrival; nonexcludable; this is a public good. B. Rival; excludable; this is a private good. C. Nonrival; excludable; this is an artificially scarce good. D. Rival; nonexcludable; this is a common resource.

A. Nonrival; nonexcludable; this is a public good.

(Problem 1e). The government is involved in providing many goods and services. For the good or service listed, determine whether it is rival or nonrival in consumption and whether it is excludable or nonexcludable. What type of good is it? Without government involvement, would the quantity provided be efficient, inefficiently low, or inefficiently high? A lighthouse on the coast A. Rival; excludable; this is a private good. Without government intervention the quantity produced would be efficient. B. Nonrival; nonexcludable; this is a public good and without government intervention the quantity produced would be inefficiently low. C. Nonrival; excludable; this is an artificially scarce good and without government intervention the quantity produced would be inefficiently low. D. Rival; nonexcludable; this is a common resource and without government intervention the privately provided quantity of highways would be inefficiently low.

B. Nonrival; nonexcludable; this is a public good and without government intervention the quantity produced would be inefficiently low.

(Problem 13a). A residential community has 100 residents who are concerned about security. The accompanying table gives the total cost of hiring a 24-hour security service as well as each individual resident's total benefit. Explain why the security service is a public good for the residents of the community. A. The security service is a public good because it is excludable and rival. B. The security service is a public good because it is nonexcludable and nonrival. C. The security service is a public good because it is excludable and nonrival. D. The security service is a public good because it is nonexcludable and rival.

B. The security service is a public good because it is nonexcludable and nonrival.

(Problem 5b). Anyone with a radio receiver can listen to public radio, which is funded largely by donations. Should the government support public radio? A. No; the privately provided quantity of programming would be efficient. B. Yes; the privately provided quantity of programming would be inefficiently low. C. Yes; the privately provided quantity of programming would be inefficiently high.

B. Yes; the privately provided quantity of programming would be inefficiently low.

(Problem 13d). A residential community has 100 residents who are concerned about security. The accompanying table gives the total cost of hiring a 24-hour security service as well as each individual resident's total benefit. If the residents act together, how many security guards will they hire? A. 4 B. 2 C. 3 D. 0

C. 3

(Problem 10a). Butchart Gardens is a very large garden in Victoria, British Columbia, renowned for its beautiful plants. It is so large that it could hold many times more visitors than currently visit it. The garden charges an admission fee of $30. At this price, 1,000 people visit the garden each day. If admission were free, 2,000 people would visit each day. Are visits to Butchart Gardens excludable or nonexcludable? Are they rival in consumption or nonrival? What type of good is it? A. Nonrival; nonexcludable; this is a public good. B. Rival; excludable; this is a private good. C. Nonrival; excludable; this is an artificially scarce good. D. Rival; nonexcludable; this is a common resource.

C. Nonrival; excludable; this is an artificially scarce good.

(Problem 3). In many planned communities, various aspects of community living are subject to regulation by a homeowners' association. These rules can regulate house architecture; require snow removal from sidewalks; exclude outdoor equipment, such as backyard swimming pools; require appropriate conduct in shared spaces such as the community clubhouse; and so on. Suppose there has been some conflict in one such community because some homeowners feel that some of the regulations mentioned above are overly intrusive. You have been called in to mediate. Using what you have learned about public goods and common resources, how would you decide what types of regulations are warranted and what types are not? Choose the correct statement. A. A regulation is warranted if it provides a public good. B. No regulations are warranted. C. A regulation is warranted if it conserves a common resource. D. A regulation is warranted if it provides a public good or if it conserves a common resource.

D. A regulation is warranted if it provides a public good or if it conserves a common resource.

(Problem 1a). The government is involved in providing many goods and services. For the good or service listed, determine whether it is rival or nonrival in consumption and whether it is excludable or nonexcludable. What type of good is it? Without government involvement, would the quantity provided be efficient, inefficiently low, or inefficiently high? Street signs A. Rival; excludable; this is a private good. Without government intervention the quantity produced would be efficient. B. Nonrival; excludable; this is an artificially scarce good and without government intervention the quantity produced would be inefficiently low. C. Rival; nonexcludable; this is a common resource and without government intervention the privately provided quantity would be inefficiently low. D. Nonrival; nonexcludable; this is a public good and without government intervention the quantity produced would be inefficiently low.

D. Nonrival; nonexcludable; this is a public good and without government intervention the quantity produced would be inefficiently low.

The best example of a good that is excludable in consumption is: national defense. an ocean. a bicycle. a park.

a bicycle.

Assigning property rights helps to correct the problems associated with common resources: because it allows property owners to exclude users and to manage the resource more efficiently. because it allows the government to determine the amount that would lead to the socially optimal amount. and therefore allows the market to better assess the marginal social benefits. because it makes the good nonrival in consumption.

because it allows property owners to exclude users and to manage the resource more efficiently. (WRONG)

5. An example of a common resource is: any private good that is monopolized. fishing in the ocean. any type of public good. coffee sold in coffee shops.

fishing in the ocean.

Common resources tend to be overused because: individuals tend to ignore the cost to others of their use of the resource. the marginal cost of allowing one more unit of consumption is zero. the individual marginal cost is greater than the marginal social cost. common resources are nonrival and nonexcludable.

individuals tend to ignore the cost to others of their use of the resource.

The best example of a good whose consumption is NOT excludable is: a bicycle. national defense. a house. a yard.

national defense.

If a good is subject to the free-rider problem and an inefficiently low level of production when left to the private market, the good must be a(n): common resource. private good. public good. artificially scarce good.

public good.

Whether or not they pay for them, people cannot be excluded from receiving the benefits of: private goods. common resources. either public goods or common resources. public goods.

public goods. (WRONG)

One way the government of Alaska could prevent an inefficiently large production of crab fishing would be to: subsidize fishermen to encourage competition. offer tax breaks for more efficient boats. sell exclusive licenses for the right to fish. allow competition from foreign fishermen.

sell exclusive licenses for the right to fish.

6. After many years, a small community builds a toll road but discovers it is little used. If it wishes the road to be used at the socially optimal level, the community should: set the toll lower. set the toll equal to $1. build another toll road. set the toll higher.

set the toll lower.