Econ 102 Quiz Week 15 - Public Goods and Externalities

The best example of a good whose consumption is excludable in consumption is:

a bicycle.

Which of the following is a common resource?

fish, forests, and a dorm kitchen

Volunteer fire departments are good examples of the ________ provision of ________.

private; public goods

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.

A good that is nonexcludable but rival in consumption is considered a:

common resource good.

Imposing a Pigouvian tax on a good, creating a system of tradable licenses, and assigning property rights are methods to alleviate the problems associated with:

common resources.

An inefficient allocation of resources will occur when:

decision makers are not faced with the full benefits and costs of their choices.

If the extent to which common resources (such as fish in the sea) should be utilized is left to the private market, then:

each individual will use the resource until his or her marginal benefit is zero, and the resource will be overused.

An example of a common resource is:

fishing in the ocean.

Common resource goods are similar to:

goods with negative externalities because not all users take into account the external costs imposed on society.

An individual is more likely to be a free rider when a good is:

nonexcludable.

As a big music fan, you want to attend a weekend blues festival in your town. The purchase of a wristband gives you and thousands of other fans access to the outdoor concert pavilion. The blues festival is a good that has the characteristics of being:

nonrival and excludable.

Economic policy is an example of a good that is:

nonrival in consumption and nonexcludable.

Since the public safety that a police force provides is ________ in consumption, the efficient price ________.

nonrival; is zero

An example of a good that is rival in consumption and nonexcludable is:

public parks.

Which of the following activities is a public good?

voting

Consider an economy with just two citizens. If Sanjay's marginal benefit from mosquito control is $10 and Anjuli's marginal benefit is $25, then the optimal level of a public good like mosquito control occurs when the marginal cost of mosquito control is:

$35.00.

Two students, Nikos and Camila, are working on a team project for a course. The project will receive one grade that will affect both students equally. Although they have done a great job, they have not kept track of their bibliography sources very well. They both have all the information, but neither has done the bibliography. Camila knows that Nikos will eventually do the bibliography, since Nikos does not like to turn in incomplete work. As a result:

Camila will end up free-riding on Nikos's labor.

What is difficult about estimating the level of a public good that will maximize social welfare using cost-benefit analysis?

It is difficult for the government to use because it is hard to estimate the marginal social benefits of supplying a public good.

The best example of a common resource is:

clean water.

When the market does not result in an efficient allocation of scarce resources, economists say there has been ________.

market failure.

A(n) ________ is excludable and rival in consumption.

private good

Suppose the Alaskan king crab harvest is unregulated and any person with a crab boat and some diesel fuel can go offshore, lower a crab pot, and harvest king crab. As a result, this common resource is overused. Which of the following policy choices might create an outcome in which the king crab harvest is socially optimal?

The state of Alaska auctions a limited number of licenses to harvest king crab.

Which of the following statements about the provision of public goods is correct?

They should be provided to the point at which the marginal cost of production equals the sum of the individual marginal benefits from all consumers of that unit.

If the marginal social benefit of a public good is greater than the marginal social cost of providing the good, then:

a community will provide the good.

When a good is nonexcludable:

a free-rider problem will exist.

The source of the inefficient use of artificially scarce goods is similar to the source of inefficiencies created by:

a natural monopoly.

Which of the following goods best fits the characteristics of a private good?

a pizza an ice-cream cone

Which of the following is an example of a common resource?

a public beach with free access

Josh has an iPhone and frequently downloads songs from the iTunes website. He pays a small fee for each download, but downloading a song does not remove it from the iTunes inventory. Other consumers can also pay the fee and download a song that Josh might have already accessed. The iTunes service is best described as:

an artificially scarce good.

The best example of a private good is:

an automobile.

If a good has a marginal cost of production of zero and an inefficiently low level of consumption, the good must be a(n):

artificially scarce good.

The government can intervene in fishing markets to avoid overfishing by:

assigning property rights, imposing a tax on usage, or granting a limited number of tradable fishing permits.

Activities that generate external costs will likely be carried out at levels that ________ those that would be efficient.

exceed

A private good is:

excludable and rival in consumption.

Computer software that you can download from the Internet for a price is an artificially scarce good because it is ________ but ________ in consumption.

excludable; nonrival

A software program is similar to an apple in that it is ________, but it is also similar to public safety in that it is ________.

excludable; nonrival in consumption

Since the 1960s, power plants have taken actions, such as switching to low-sulfur coal and installing scrubbers in their smokestacks, which have significantly reduced the problem of acid rain. Power plants took these actions mainly because:

government policies provided power companies with incentives to take these actions.

The marginal social cost of a common resource is ________ than an individual's marginal cost, and without government intervention the market will allow provision of ________ of the common resource than is socially optimal.

greater; more

Consumption of a common resource is inefficiently too ________ because the marginal social cost of the resource is ________ than the private marginal cost.

high; greater

No individual is willing to pay for the efficient quantity of a public good because the marginal benefit to an individual ________ the marginal social benefit.

is less than

Whenever a species is threatened with extinction, it is likely that:

no one has exclusive property rights to it.

Most neighborhood streets are illuminated at night by streetlights. The streetlights are ________ and ________. Therefore, they are likely to be ________ by the competitive market.

nonrival; nonexcludable; underprovided

When Joe watched a television movie, his viewing was ________ in consumption because other people ________ able to view the movie at the same time Joe did.

nonrival; were

A public good is a good or service for which exclusion is:

not possible and which is nonrival in consumption.

Common resources tend to be ________ through private markets.

overconsumed

A private good is a good or service for which exclusion is:

possible and which is rival in consumption

If a good is subject to the free-rider problem and an inefficiently low level of production, the good must be a(n):

public good.

On hot summer days, beach parking lots are usually full by early morning even though one must pay in order to park there. Parking at such lots is:

rival in consumption and excludable.

One way the government of Alaska could prevent an inefficiently large production of crab fishing would be to:

sell exclusive licenses for the right to fish.

If the marginal benefit received from a good is greater than the marginal social cost of production, then:

society's well-being can be improved if production increases.

The free-rider problem is a direct result of:

the inability to exclude nonpayers.

The additional cost imposed on society as a whole by an additional unit of pollution is:

the marginal social cost of pollution.

A characteristic of public goods is that:

their benefits cannot be withheld from anyone, regardless of whether a person pays for them.

If government officials set an emissions tax too low:

there will be too much pollution.

If the use of a common resource is determined in the private market, the resource:

will be overused, since the marginal benefit will be equal to the marginal private cost of production, which is less than the marginal social cost.

If policy makers provide only enough tradable permits to provide efficient use of a common resource, only those who ________ will use the resource.

will gain the most

When goods are rival in consumption and excludable, markets:

will produce an efficient quantity of the good

In London, any motorist entering a particular area in the city center during certain specified times must pay a congestion fee equal to £8, with fines for noncompliance rising to as high as £120. The congestion fee is:

an example of a Pigouvian tax aimed at regulating the use of the common resource of city streets and an attempt to internalize the costs due to traffic delays and congestion that are created by drivers in the specified area.

When comparing the characteristics of common resources and artificially scarce goods, we find that:

artificially scarce goods are nonrival in consumption (while common resources are not), and common resources are nonexcludable (while artificially scarce goods are not).

Producers of artificially scarce goods face similar ________ as natural monopolists; they decline over the relevant range of output.

average total costs

Suppose the small town of Falls Valley has a mosquito problem. After a bad summer, the town accountants explain that the marginal cost of providing one more treatment for mosquito control is $100,000. The town should provide the additional mosquito control only if the marginal:

benefit for all individual citizens adds up to at least $100,000.

The best example of an artificially scarce good is:

cable television broadcasting.

An electronic book is an artificially scarce good because the private market ________ prevent consumption by people who do not pay for it. Further, the same e-Book ________ be consumed by more than one person at the same time.

can; can

For a public good, nonpayers ________ excluded from obtaining the benefits of the good.

cannot be

A whale is a common resource because the private market ________ prevent consumption by people who do not pay for it, and the same unit ________ be consumed by more than one person at the same time.

cannot; cannot

An e-Book is similar to a published book in that it is ________, but it is also similar to national defense in that it is ________.

excludable; nonrival in consumption

If the market produces an efficient level of a good, then we know that the good must be ________ and ________ in consumption.

excludable; rival

A good is most likely to be artificially scarce if:

it is excludable but nonrival.

Every few months, public radio announces a call for pledge support. During this time, it asks listeners to contribute to their local public radio station. Although they raise money during this time, it often falls short of the amount they wish to raise because:

listeners know they will be able to hear public radio even if they don't contribute.

A key element that a public good displays is:

nonexclusion.

DeVonda owns a music store. One night, vandals broke her store's front window. DeVonda called the police, and the police investigated the crime. The police services that DeVonda used are best described as:

public goods.

After many years, a small community decides to build a toll road but then discovers it is little used. If it wishes the road to be used at the socially optimal level, the community should:

set the toll equal to zero.

Suppose government officials have set an emissions tax to reduce pollution. Assume the optimal tax would be $500 but government officials have set the tax equal to $900. At the equilibrium with the $900 tax:

the marginal social benefit of pollution will be $900.

If the marginal benefit received from a good is equal to the marginal social cost of production, then:

the market is producing an efficient quantity.

Public goods should be produced up to the point at which the marginal cost of production equals:

the sum of the individual marginal benefits from all consumers of that unit.

Clean water in a river is nonexcludable because:

the supplier cannot prevent consumption by people who do not pay for it.

If a good is nonrival in consumption and a positive price is charged by the supplier, then:

there is inefficiently low consumption of this good.

When the allocation of resources is such that a different allocation would increase society's welfare, economists say:

there is market failure.

For a nonexcludable good like national defense, the private market will lead to:

too little production of the good.

If left to the private market, the amount of fire protection provided in a city would be ________ than it is now, and free riders would pay ________ for fire protection.

lower; nothing

An individual will continue to use a common resource until his or her:

marginal benefit is zero.

The encouragement to voluntarily contribute to the provision of goods:

may lead to the provision of public goods.

Which of the following is an example of an artificially scarce good?

music that is downloadable from the Internet for a fee

Which of the following is the best example of a good whose consumption is not excludable?

national defense

The best example of a good whose consumption is not excludable is:

national defense.

National defense and clean air are similar in that both are ________, but they differ in that national defense is ________ while clean air is not.

nonexcludable; nonrival in consumption

When a good is nonrival in consumption, the most efficient price for the consumption of the good is:

zero.

A small public park in a large town with many other parks often has very few visitors because of its size. There is no fee to enter the park, but few people visit it, since other parks have more amenities. This park is:

both nonrival in consumption and nonexcludable.