Econ Exam 3

Kyle and Stan are playing Odds or Evens, where Kyle is designated as the "odd" player and Stan is designated as the "even" player. They decide to play the game 10 times. Stan's ideal mixture is to -"shoot 1" every time since Kyle is the "odd" player. -"shoot 1" 50% of the time and "shoot 2" 50% of the time. -Stan's ideal mixture depends on Kyle's ideal mixture. -"shoot 2" every time since he is the "even" player.

"shoot 1" 50% of the time and "shoot 2" 50% of the time.

Daisy: Contribute Luke Contribute Dont Bo Contribute 10,10,10 6,12,6 Dont 12,6,6 8,8,2 Daisy: Don't Contribute Luke Contribute Dont Bo Contribute 6,6,12 2,8,8 Dont 8,2,8 4,4,4 Three neighbors in a cul-de-sac, Bo, Luke, and Daisy, have an option of contributing or not contributing to paying for and installing outdoor security lighting to help make their cul-de-sac safer. For each person who contributes, one security light will be installed. The payoff matrix for this scenario is shown above. Refer to Figure 10.1. When each player plays his or her dominant strategy, society is poorer and the payoffs are smaller by ________ units than if each player had played the strategy with the ideal outcome for both the individual players and for the group as a whole. -12 -30 -18 -6

18

If there are an estimated 20,000 barrels of unknown reserves of oil, annual consumption of oil is 800 barrels, and it is estimated that the supply of oil will be depleted in 50 years, how many barrels of proven reserves are there, all else equal? -20,000 -60,000 -36,000 -40,000

40,000

Kyle and Stan are playing Odds or Evens, where Kyle is designated as the "odd" player and Stan is designated as the "even" player. They decide to play the game 10 times. If Kyle plays his ideal mixture, Stan's expected payoff is zero when he -plays his ideal strategy. -plays a pure strategy of "shoot 2." -plays a pure strategy of "shoot 1." -All of the above are correct.

All of the above are correct.

A city-run swimming pool is an example of a pure public good. -True -False

False

The world is more likely to run out of gold than it is to run out of tigers. -True -False

False

The free-rider problem arises because pure public goods are nonrival. -True -False

False (nonexcludability)

A pure public good will never be provided by individuals acting on their own initiative. -True -False

False (provided at less socially desirable amount)

Mamihlapinatapai is a one-word summary of the volunteer's dilemma from the Maasai tribe of Tanzania. True False

False: The word is from the Yaghan Indians of Tierra del Fuego, South America.

Eminent domain is when individuals form an alliance to ensure that all members will volunteer in case of a volunteer's dilemma. True False

False: coalition building

With respect to solving volunteer's dilemmas by coalition building and bargaining, more potential volunteers means lower transactions costs. True False

False: higher

One way to get more organ donors is to assume people wish to donate and then let them opt out. This has proven much more successful than assuming people don't wish to donate and letting them opt in. Such a reframing of options is called a tweak. True False

False: nudge

Which of the following best illustrates the free rider problem? -Since no one owns rhinos and rhinos are valued for their horns, rhinos can be hunted to extinction. -Homeowners in your neighborhood decide that new landscaping would improve the neighborhood. Your neighbors ask you to contribute toward the cost, but you refuse. -For $300, you can buy a season pass to ski at a resort all winter long. -Juliette has a great music collection, but uses AirPods to keep Cooper from listening.

Homeowners in your neighborhood decide that new landscaping would improve the neighborhood. Your neighbors ask you to contribute toward the cost, but you refuse.

Scenario 12.2 Shari needs a kidney, and her two friends, Jerome and Eliza, are both good potential donors. If Shari gets a kidney, she will live and each of her two friends will get 8,000 units of satisfaction. If Shari does not get a kidney, she will die and each of her friends will get no satisfaction. The cost of donating a kidney totals - 6,000 units of satisfaction. Refer to Scenario 12.2. In this game, Eliza's tough strategy would lead to her preferred equilibrium of -Jerome donates a kidney and Eliza does not. -both Eliza and Jerome donate a kidney. -neither Eliza nor Jerome donates a kidney. -Eliza donates a kidney and Jerome does not.

Jerome donates a kidney and Eliza does not.

Suppose Louisiana issues an alligator hunting permit to DeKalb, who values an alligator hunt at $2,000, instead of LaGrange, who values an alligator hunt at $3,000. If alligator hunting permits are allowed to be bought and sold in a secondary market, _______. -DeKalb will use the permit and society will suffer a deadweight loss -LaGrange will buy DeKalb's permit and the economic pie will grow by $1,000 -LaGrange will buy DeKalb's permit and the economic pie will grow by the price LaGrange pays -There is no scope for a bargain between LaGrange and DeKalb

LaGrange will buy DeKalb's permit and the economic pie will grow by $1,000

Which of the following exemplifies the tragedy of the commons? -The Amazon rainforest wilderness is being cut down and turned into farmland as pioneers move inland. -The federal government de-funds public television. -A viral pandemic causes temporary shortages of toilet paper nationwide. -Supplies of gas dwindle following a refinery fire.

The Amazon rainforest wilderness is being cut down and turned into farmland as pioneers move inland.

Which of the following exemplifies the tragedy of the commons? -The Lakeview Estates community is growing so fast that the city's only fire station is not able to keep pace with the population growth in the community. -The Tibetan Antelope, distinguished for its fur which is commonly used as a light wool, is a target for poachers. -British citizens receive free universal health care administered by the government. -Residents of the southern coast of Alaska receive only one public broadcasting signal which may be eliminated altogether if government funding is cut.

The Tibetan Antelope, distinguished for its fur which is commonly used as a light wool, is a target for poachers.

The tragedy of the commons was avoided in the Middle Ages in much the same way economist Elinor Ostrom's research suggested. Which of the following ways reflects Ostrom's findings, and was actually conducted in the middle ages? -There was social pressure to uphold traditionally accepted limits on family. -The government imposed a tax for the use of the commons. -Local law enforcement monitored entry into the commons. -Common grounds were sold to individuals.

There was social pressure to uphold traditionally accepted limits on family.

A situation in which a single individual can provide a public good is known as the volunteer's dilemma. True False

True

One feature of the volunteer's dilemma is that as the group gets larger, the probability of no one acting at all increases. True False

True

Privatizing a commons tends to lead to a slower depletion of the resource. -True -False

True

All of the following are examples of the volunteer's dilemma except which one? -You are trying to decide whether to spend time volunteering at a local homeless shelter or at a neighborhood elementary school. -Five high school students are contemplating sneaking out of school after lunch. One student has to create a diversion that will get him sent to detention in order for the others to escape unseen. -A house is on fire and there may be someone still inside. Who will go inside the burning house to attempt to rescue the potential victim? -You, along with a dozen other drivers, witness a car accident. You cannot decide whether to dial 911 or let one of the other witnesses dial 911 instead.

You are trying to decide whether to spend time volunteering at a local homeless shelter or at a neighborhood elementary school.

Which of the following is an example of a product that is excludable and rival? -a tuna fishery -a city swimming pool -a cinnamon roll -a lunar eclipse

a cinnamon roll

Which of the following is an example of a club good? -a tuna fishery -a city swimming pool -a cinnamon roll -a lunar eclipse

a city swimming pool

Suppose Louisiana issues an alligator hunting permit to DeKalb, who values an alligator hunt at $2,000, instead of LaGrange, who values an alligator hunt at $3,000. The $1,000 difference in values is -a deadweight loss. -a negative externality. -the social cost of the alligator hunt. -a transactions cost.

a deadweight loss.

Diffusion of responsibility exists when -a group of bystanders all agree that something needs to be done but each feels less personal responsibility for taking action because each perceives that there are others who could take action. -the least-capable member of a group exerts his influence over the rest of the group when trying to arrive at a decision on how to internalize an externality. -the members of a group believe one thing but mistakenly assume that most of the other members believe something else. -a majority of people in a group do not have the intellectual capacity of arriving at a viable solution to a public goods problem.

a group of bystanders all agree that something needs to be done but each feels less personal responsibility for taking action because each perceives that there are others who could take action.

Negative externalities and the tragedy of the commons are problems that have a common source. What is this common source? -self − interest motives of producers and consumers -a lack of competition -an overabundance of resources -a lack of clearly − defined and enforced property rights

a lack of clearly − defined and enforced property rights

Which of the following is an example of a pure public good? -a tuna fishery -a city swimming pool -a cinnamon roll -a lunar eclipse

a lunar eclipse

In economics, the term "free rider" refers to -a manager who imposes menial time consuming activities on others. -a person who volunteers his services. -a person who enjoys the benefits of a good without bearing a proportionate share of the costs. -a person who evades taxes.

a person who enjoys the benefits of a good without bearing a proportionate share of the costs.

Which of the following is an example of a product that is nonexcludable and rival? -a city swimming pool -a cinnamon roll -a tuna fishery -a lunar eclipse

a tuna fishery

Suppose Florida issues an alligator hunting permit to Jackson, who values an alligator hunt at $2,500, instead of Oliver, who values an alligator hunt at $4,000, and alligator hunting permits are allowed to be bought and sold in a secondary market. If Jackson and Oliver agree on a price for Jackson to transfer the permit to Oliver, society would capture ________ cooperative surplus. -The additional cooperative surplus captured by society would depend on the negotiated price of the permit. -an additional $6,500 of -no additional -an additional $1,500 of

an additional $1,500 of

Proven reserves of oil are oil deposits that __________. -are economical to extract at today's prices -are known -are both known and economical to extract at today's prices -are both unknown and uneconomical to extract

are both known and economical to extract at today's prices

Resources that ________ protected by well-defined property rights are in ________ danger of being depleted. -are; zero -are; the most -are not; zero -are not; the most

are not; the most

Swordfish are more likely to be depleted than cattle because _________. -sea creatures are less hardy that terrestrial creatures -swordfish are so difficult to locate -swordfish are so easy to catch -cattle are privately managed; swordfish belong to whoever catches them

cattle are privately managed; swordfish belong to whoever catches them

Club goods differ from pure public goods in that -club goods are excludable while pure public goods are nonexcludable. -club goods are rival while pure public goods are nonrival. -club goods are nonrival while pure public goods are rival. -club goods are nonexcludable while pure public goods are excludable.

club goods are excludable while pure public goods are nonexcludable.

When individuals form an alliance to ensure that all members will volunteer in case of a volunteer's dilemma, this is called -compulsory volunteerism. -coalition building. -bargaining. -eminent domain.

coalition building.

A _______ is both rival and nonexcludable. -club good -pure public good -pure private good -common pool resource

common pool resource

A resource that is open to all is called a(n) _______. -public good -common pool resource -club good -sustainable resource

common pool resource

With limited exceptions, all Norwegian citizens over the age of 18 are required to serve in the military. This is an example of ______. compulsory volunteerism coalition building bargaining eminent domain

compulsory volunteerism

Suppose that increased scarcity drives up oil prices. This should cause consumers to ______. -consume more oil -consume less oil -prices have no impact on consumption -continue consuming the same amount of oil

consume less oil

The negative effect of having more potential volunteers is the _______. diffusion effect synergy effect externalizing effect size effect

diffusion effect

When a group of bystanders all agree that something needs to be done but each feels little personal duty for taking action because each perceives that there are others who could take action, _______ exists. strategic coalition building diffusion of responsibility personal responsibility pluralistic ignorance

diffusion of responsibility

All else equal, when oil prices decrease, people are ________ to look for oil substitutes. This will ________ the number of years it will take to deplete the stock of oil. -encouraged; increase -discouraged; decrease -discouraged; increase -encouraged; decrease

discouraged; decrease

Suppose that increased scarcity drives up oil prices. This should ________. -encourage more oil exploration -discourage additional oil exploration -have no impact on oil exploration -discourage additional oil exploration, and reduce the number of years until oil is depleted.

encourage more oil exploration

Suppose the government of a town of 2,000 people implements a tax on each of 5 people in a small neighborhood to raise $1,000 for a sculpture that will be placed in the common area of that 5 person neighborhood. Each of the 5 people in the small neighborhood will receive $120 in benefits from the sculpture. This tax is likely to -generate little opposition from the 5 people in the affected neighborhood. -generate the desirable social outcome -generate a great deal of opposition from the 5 people in the affected neighborhood. -generate a great deal of opposition from the community.

generate a great deal of opposition from the 5 people in the affected neighborhood.

Suppose that increased scarcity drives up oil prices. As that happens, some uneconomical sources of oil tend to become more economical; this causes proven reserves of oil to ______. -proven reserves decrease, but the number of years left before oil is depleted increases -this has no effect on proven reserves -increase -decrease

increase

All else equal, when oil prices increase, some uneconomical sources of oil tend to become more economical, and this will ________ proven reserves of oil and ________ the number of years it will take to deplete the stock of oil. -decrease; decrease -increase; increase -increase; decrease -decrease; increase

increase; increase

In the case of public goods, nonexcludability leads to -insecure property rights. -mutual assurance. -low transactions costs. -government subsidization

insecure property rights.

When a good is nonrival, ________. -there is a surplus of the good -the producer cannot prevent people from consuming it -many people can consume the good simultaneously -the good is produced in a competitive market

many people can consume the good simultaneously

For resources whose property rights are not well-defined or well-enforced, -people have little incentive to acquire the resource because if the the property rights are not well − defined or well − enforced, they are most likely of little value. -people have an incentive to acquire a limited amount of that resource for personal use, but no more than they can use personally. -people have an incentive to acquire as much of the resource as possible for themselves before someone else does. -people have no incentive to acquire the resource since they do not have the property rights to that resource.

people have an incentive to acquire as much of the resource as possible for themselves before someone else does.

The "tragedy of the commons" is a situation in which ______. -individuals are forbidden access to a common resource -rich people control a resource that common people desperately need private owners of a resource destroy that resource so others can't have it -people overuse a common resource

people overuse a common resource

When the members of a group believe one thing but mistakenly assume that most of the other members believe something else, _______ exists. diffusion of responsibility compulsory volunteerism a volunteer's dilemma pluralistic ignorance

pluralistic ignorance

Jeremiah is not a fan of the ballet, but he believes that his friends all enjoy the cultural experience that ballet brings and he does not want to appear unsophisticated. Unbeknownst to Jeremiah, all of his friends share the same opinion of the ballet as he does, and none of them want to appear unsophisticated to the rest of the group. This results in the entire group of friends attending a production of Swan Lake, a production none of the friends actually had any desire to attend. This is an example of -pluralistic ignorance. -a prisoner's dilemma. -dysfunctional family syndrome. -diffusion of responsibility.

pluralistic ignorance.

Government typically solves the free − rider problem by using its -ability to print money. -power of taxation. -power of eminent domain. -ability to borrow money from the Federal Reserve.

power of taxation.

The tragedy of the commons most closely resembles a ________ game. -battle of the sexes -prisoner's dilemma -pure coordination -chicken

prisoner's dilemma

The resources that are most likely to last a long time into the future are those that are _________. -public resources open to all -private resources, carefully managed -expensive today -abundant today

private resources, carefully managed

Leaving open − access resources open to all people but restricting the intensity of the use of the resources assigns -property rights to everyone since the resource is available to be used by everyone. -temporary property rights to those people given permission to use the resource. -property rights to no one since the intensity of the use of the resource has been restricted. -permanent property rights to the government.

property rights to everyone since the resource is available to be used by everyone.

To maximize the economic pie, government should -provide no public goods. -provide only those public goods whose benefits outweigh their costs -.provide all possible pure public goods. -provide only those public goods whose costs outweigh their benefits.

provide only those public goods whose benefits outweigh their costs.

Markets are generally more effective at providing ________ and governments are most effective at providing ________.

pure private goods; pure public goods

When playing a game, a mixed strategy refers to _______. -consistently alternating between two strategies each time a game is played -never playing the same strategy more than once -never playing the same strategy twice in a row -randomly selecting a strategy

randomly selecting a strategy

The positive effect of having more potential volunteers to act is the ______. externalizing effect size effect synergy effect diffusion effect

size effect

Scenario 12.1 Simon and Paula are walking home from school and come across a man being attacked by a crazed miniature poodle. It takes only one of them to save the man from the poodle, but since responsibility is diffuse, each is only 70% likely to try to rescue the man.Refer to Scenario 12.1. Suppose that a third friend, Ryan, joins Simon and Paula on their way home from school, and this reduces the probability of any particular individual from stepping forward to help the man being attacked from 70% to 60%. In this case, the ________ and the man's chance of being rescued ________ because of Ryan joining the group. -size effect outweighed the diffusion effect; increased -size effect outweighed the diffusion effect; decreased -diffusion effect outweighed the size effect; increased -diffusion effect outweighed the size effect; decreased

size effect outweighed the diffusion effect; increased

As oil supplies dry up, prices rise. That touches off conservation efforts, new exploration, and the development of substitutes. Those efforts tend to ________. -decrease proven reserves -have no impact on the rate of depletion -slow down the rate of depletion -accelerate the rate of depletion

slow down the rate of depletion

Of the following resources, which one is the world most likely to run out of? -rubies -swordfish -oil -beer

swordfish

Restricting access to endangered common resources assigns -permanent property rights to those people given permission to use the resource -property rights to no one since access has been restricted to only a select few. -property rights to society in general since the resource is a common resource. -temporary property rights to those people given permission to use the resource

temporary property rights to those people given permission to use the resource

The individual transferrable quota system (ITQ) used to control overfishing is a variation of ______. -the cap-and-trade system -the tragedy of the commons -a pollution tax -a chicken game

the cap-and-trade system

Laws in some countries require bystanders to come to the aid of people in mortal danger. This legal obligation is called -the duty to rescue. -judicial discretion. -eminent domain. -compulsory volunteerism.

the duty to rescue.

Pluralistic ignorance exists when -a group of bystanders all agree that something needs to be done but each feels less personal responsibility for taking action because each perceives that there are others who could take action. -a majority of people in a group do not have the intellectual capacity of arriving at a viable solution to a public goods problem. -the members of a group believe one thing but mistakenly assume that most of the other members believe something else. -the least-capable member of a group exerts his influence over the rest of the group when trying to arrive at a decision on how to internalize an externality.

the members of a group believe one thing but mistakenly assume that most of the other members believe something else.

You and your siblings threw a party when your parents were away. When they returned and asked which of you was responsible, nobody raised his or her hand. This is an example of: denial the prisoner's dilemma the volunteer's dilemma. an assurance game

the volunteer's dilemma.

When you consume a rival good, _____. -it doesn't keep others from enjoying the same good -there is less of the good left for others to consume -you cannot keep those who did not pay for the good from enjoying its benefits -you can keep those who did not pay for the good from enjoying its benefits

there is less of the good left for others to consume

Of the following resources, which one is the world most likely to run out of? -oil -tigers -diamonds -pork

tigers

People have little incentive to contribute to a project if they will be able to enjoy the benefits of the finished project for free. -true -false

true

Common pool resources differ from pure public goods in that -common pool resources are resources that cannot be renewed but the production of pure public goods can be increased at any time. -common pool resources are collectively owned by a group of people while pure public goods are owned by the government. -common pool resources are nonexcludable while pure public goods are excludable to those who do not pay of the good. -unlike pure public goods, common pool resources are rival in consumption.

unlike pure public goods, common pool resources are rival in consumption.

A good is considered to be a rival good if -your consumption of the good reduces the quantity available for others to consume. -you can keep those who did not pay for the good from enjoying its benefits. -it is jointly owned by all members of a community. -you cannot keep those who did not pay for the good from enjoying its benefits.

your consumption of the good reduces the quantity available for others to consume.

A game in which one player's winnings equal the other player's losings is called a positive-sum game all-or-nothing game. tit-for-tat game. zero-sum game.

zero-sum game.