Econ chapter 11 final exam

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 vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"

2 acres

What causes the Tragedy of the Commons?

Social and private incentives differ, and common resources are not excludable but are rival in consumption.

A state-owned bridge is

a common resource when it is congested, but it is a public good when it is not congested.

Which of the following goods is rival and excludable?

a congested toll road

Governments can improve market outcomes for

both public goods and common resources

Goods that are rival in consumption include both

common resources and private goods

The failure of markets to adequately protect the environment can be viewed either as a problem of

externalities or as a problem of common resources

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. An economist would suggest that

it would be more efficient if the electric company raised its rates for electricity at peak times.

If a highway is congested, then use of that highway by an additional person would lead to a

negative externality

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good.

a traffic light at an intersection is

rival but not excludable in consumption

Producers have little incentive to produce a public good because

there is a free-rider problem.

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that

weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.