CH11

A parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole

Tratedgy of the Commons

T/F: A fireworks display at a private amusement park is a good provide by a natural monopoly

True

T/F: An apple sold in a grocery store is a private good

True

T/F: Common resources are overused because common resources are free to the consumer

True

T/F: If someone owned the property rights to clean air, the person cold charge for the use of the clean air, and thus, air pollution could be reduced to the optimal level

True

T/F: Private markets sells apples at a roadside stand, the apples are public goods because they are provided by the government

True

T/F: Public goods are related to positive externalities because the potential buyers of public goods ignore the external benefits those goods provide to other consumers when they make their decision about whether to purchase public goods

True

Goods that are excludable but not rival in consumption

Club goods

Good that are rival in consumption but not excludable

Common resources

A study that compares the costs and benefits to society of providing a public good

Cost-benefit analysis

The property if a good whereby a person can be prevented from using it

Excludability

T/F: The socially optimal price for a fishing license is zero

False; a positive price is optimal so that the price reduces the quantity demanded of fish to the socially optimal level

T/F: Common resources are related to negative externalities because consumers of common resources ignore the negative impact of their consumption on other consumers of the common resources

False; at some point, the cost of increasing safety (reducing highway deaths) exceeds the value of a life

T/F: The government should continue to spend to improve the safety of our highways until there are no deaths from auto accidents

False; at some point, the cost of increasing safety (reducing highway deaths) exceeds the value of a life

T/F: If the city government sells apples at a roadside stand, the apples are public goods because they are provided by the government

False; goods are categorized as public r private based on their characteristics, not who provided them,so an apple sold to a consumer is private regardless of who provided the apple

T/F: A public good is both rival in consumption and excludable

False; it is neither rival in consumption nor excludable

T/F: A common resource is neither rival in consumption nor excludable

False; it is rival in consumption but not excludable

T/F: National defense is a classic example of a common resource

False; national defense is an example of a public good

T/F: When the government uses cost-benefit aalysis to decide whether to provide a public good, the potential benefit of the public good can easily be established by surveying the potential consumers of the public good

False; qualifying benefits is difficult and respondents have little incentive to tell the truth

T/F: Club goods are free to the consumer of the good

False; they are excludable so a price must be paid to receive them, but they are not rival in consumption, so they can be enjoyed by many at the same

A person who receives the benefit of a good but avoids paying for it

Free rider

Goods that are both excludable and rivalry in consumption

Private goods

Goods that are neither excludable nor rival in consumption

Public goods

The property of a good whereby one person's use diminishes other people's use

Rivalry in consumption

Which of the following is an example of a common resource? a. a national park b. a fireworks display c. national defense d. Iron one

a. a national park

A congested toll road is a. a private good b. a public good c. a common resource d. a club good

a. a private good

A free rider is a person who a. receives the benefit of a good but avoids paying for it b. produces a good but fails to receive payment for the good c. pays for a good but fails to receive any benefit from the good d. fails to produce but is allowed to consume goods

a. receives the benefit of a good but avoids paying for it

Suppose each of the 20 neighbors on a street vlaues street repairs at $3,000. The cost of the street repairs is $40,000. Which of the following statements is true? a. It is not efficient to have street repaired b. It is efficient for each neighbor to pay $3,000 to repair the section of street in front of his home c. It is efficient for the government to tax the residents $2,000 each and repair the road d. None of the above is true

b. It is efficient for the government to tax the residents $2,000 each and repair the road

A public good is a. Both rival in consumption and excludable b. Neither rival in consumption nor excludable c. Rival in consumption but not excludable d. Not rival in consumption but excludable

b. nether rival in consumption nor excludable

A positive externality affects market efficiency in a manner similar to a a. private good b. public good c. a common resource d. an excludable good

b. public good

When government employ cost-benefit analysis to hep them decide whether to provide a public good, measuring benefits is difficult because a. one can never place a value on human life or the government b. respondents to questionnaires have little incentive to tell the truth c. there are no benefits to the public because a public good is not exlcudable d. the benefits are infinite because a public good is not rival in consumption and infite amount of people can consume it a the same time

b. respondents to questionnaires have little incentive to tell the truth

If one person's consumption of a good diminishes other people's use of the good, the good is said to be a. A common resource b. A club good c. Rival in consumption d. Excludable

c. Rival in consumption

A negative externality affects market efficiency in a manner similar to a. private good b. public good c. a common resource d. an excludable good

c. a common resource

A person who regularly watches public television but fails to contribute to public television's fundraising drives is known as a. common rider b. costly rider c. a free rider d. an unwelcome rider e. excess baggage

c. a free rider

The Tragedy of the Commons is parable that illustrates why a. public goods are underproduced b. private goods are underconsumed c. common resources are overconsumed d. club goods are overconsumed

c. common resources are overconsumed

A club good is a. Both rival in consumption and excludable b. Neither rival in consumption nor excludable c. Rival in consumption but not excludable d. Not rival in consumption but excludable

c. not rival in consumption but not excludable

A common resource is a. Both rival in consumption and excludable b. Neither rival in consumption nor excludable c. Rival in consumption but not excludable d. Not rival in consumption but excludable

c. rival in consumption but not excludable

When markets fail to allocate resources efficiently, the ultimate source of the problem is usually a. that prices are not high enough so people overconsume b. that prices are not low enough so firms overproduce c. that property rights have not been well established d. government regulation

c. the property rights have not been well established

Which of the following are potential solutions to the problem of air pollution? a. auction off pollution permits b. grants rights of the clean air to citizens so that firms must purchase the right to pollute c. regulate the amount of pollutants that firms can put in the air d. all of the above

d. all the above

If a person can be prevented from using a good, the good is said to be a. a common resource b. a public good c. rival in consumption d. excludable

d. excludable

Which of the following is an example of a public good? a. whales in the ocean b. apples on a tree in a public park c. hot dogs at a picnic d. national defense

d. national defense

Public goods are difficult for a private market to provide due to a. The public goods problem b. The rivalness problem c. The Tragedy of the Commons d. The free-rider problems

d. the free-rider problema

Suppose the requiring motorcycle riders to wear helmets reduces the probability of a motorcycle fatality from 0.3 percent to 0.2 percent over the lifetime of a motorcycle rider and the cost of a lifetime supply of helmets is $500. It is efficient for the government to require riders to wear helmets if human life is valued at a. $100 or more b. $150 or more c. $500 or more d. $50,000 or more e. $500,000 or more

e. $500,000 or more