Econ test 3

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commonsleads to a destruction of the grazing resource. If the town wants to reduce the negative externality, then (x) the town could require all of the sheep owners that want to use the commons to pay a significant fee foraccess to the commons. (y) the town could auction off a limited number of sheep-grazing permits to correct this problem. (z) the town could assign land property rights to individual owners to correct this problem

A. (x), (y) and (z

Which of the following suggests that individuals do not place an infinite value on human life?' (x) parents that do not use safety devices in cars to protect their children from traffic accidents (y) road intersections without stop signs and railroad crossings without safety gates (z) sky-diving and bungee jumping

A. (x), (y) and (z

Which of the following statements about the free-rider problem is (are) correct? (x) A free-rider is a person who receives the benefit of a good but avoids paying for it. (y) The free-rider problem is worse if the number of beneficiaries is large. (z) The free rider problem can exist for any good that is nonexcludable

A. (x), (y) and (z)

Suppose that the town of Belville is considering hiring an additional police officer. The reduction in crime isestimated to be worth $20 for each of the 3,500 residents in Belville. What should the town of Belville do?

A. Hire the police officer if the cost of the new officer is less than $70,000

Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk ofsomeone dying in an accident from 4.20 percent to 1.75 percent over the life of the highway. If a human life isworth $12.5 million, then the project is worth doing as long as it does not cost more than

B. $306,250.

The provision of public goods gives rise to

B. positive externalities, whereas the use of common resources gives rise to negative externalities.

which of the following is correct A. Alice purchases a burger at a fast-food restaurant and gets a second burger free because the restaurantis having a "buy one, get one free" sale. B. Boris receives a free lunch from the local "Meals on Wheels" program because of his low monthlyincome. Yet his next-door neighbor, Natasha, is not eligible for the free lunch. C. Cathy owns Buddy, a large and active dog who barks whenever anyone walks near her house. Charleslives next to Cathy, and Buddy can be seen and his barking can be heard whenever anyone walks nearhis house, too. Thus, Charles receives free protection from burglars because of Buddy's barking. D. Both Douglas and Darla receive low-cost dental care at a dental clinic, so neither of them pays the fullcost of the care. E. Edward sends money to the local public radio station whenever the station asks for donations becausehe believes that he will feel overwhelmin

C. Cathy owns Buddy, a large and active dog who barks whenever anyone walks near her house. Charleslives next to Cathy, and Buddy can be seen and his barking can be heard whenever anyone walks nearhis house, too. Thus, Charles receives free protection from burglars because of Buddy's barking.

Under which of the following scenarios would a park be considered a public good?

C. Visitors can enter the park free of charge and there are always plenty of empty picnic tables

To increase safety at a bad intersection in your town, the town must decide whether to install a traffic light at acost of $185,000. If the traffic light reduces the risk of fatality by 1.45 percent and the value of a human life isabout $12 million, the town should _______ the light because the expected benefit of ________

C. not install; $174,000 is less than the cost.

According to the textbook, private companies will invest in medical research if

C. they will produce a specific product for which they may receive a patent

the 100 residents of Midtown are considering a fireworks display. 30 residents value this public good at $24per resident; 35 residents value the good at $18 per resident; 20 residents value the good at $14 per resident;and 15 residents, who dislike fireworks value the good at negative $8 per resident. Fireworks cost the town$1,600, or $16 per person. The efficient outcome is for the town

C. to not provide the public good because the total value of all residents is less than the total cost

When an infinite value is placed on human life, policymakers who rely on cost-benefit analysis (x) are likely to always make decisions that optimally allocate society's scarce resources. (y) would expect government to provide the good if private markets did not provide it. (z) are forced to pursue any project in which a single human life is saved.

D. (y) and (z) only

Oil is found in large pools underneath the surface of the earth and ownership rights to the pools are oftenunclear. As such A. oil could be considered a common resource because it is nonexcludable B. it is rivalrous because when one landowner uses a well to extract oil, less is available for the otherlandowners above the pool of oil. C. oil could be considered a private good if ownership rights are clearly defined when one person owns all ofthe property above the pool of oil D. All of the above E. Both A and C

D. All of the above

Which of the following statements is (are) correct? A. Both public goods and common resources are nonexcludable but common resources are rivalrous inconsumption and public goods are nonrivalrous in consumption. B. Both club goods and private goods are excludable but private goods are rivalrous in consumption andclub goods are nonrivalrous in consumption. C. A congested public park is a common resource because it is rivalous and nonexcludable and cabletelevision is a club good because cable television is usually nonrivalrous and excludable. D. All of the above E. Both A and B

D. All of the above

Which of the following statements is (are) correct? A. The Tragedy of the Commons occurs because common resources are nonrivalrous in consumption. B. When one person uses a common resource, other people are usually not as well off due to thatusage. As a consequence, a negative externality occurs when someone uses the common resource. C. On summer weekends thousands of people head to the beach. An overcrowded public beach is anexample of the Tragedy of the Commons. D. All of the above E. Both B and C

D. All of the above

if the local government in the small community of Sparkle, North Carolina decides to put on a public fireworksdisplay, the display would probably be A. nonexcludable .B. nonrivalrous in consumption C. a public good. D. All of the above. E. A and B, only

D. All of the above.

Suppose a toll is collected from each car traveling during rush hour on a congested road. This is an effective correction to the Tragedy of the Commons because the toll provides an incentive for commuters to A drive at times other than rush hour. B. car-pool or use public transit rather than driving. C. drive more fuel-efficient cars. D. All of the above E. Both A and B

E. Both A and B.

Market failure associated with the free-rider problem A is a result of benefits that accrue to those who don't pay. B. is a result of a problem associated with any good that is nonrivalrous in consumption.' C. occurs because it is impossible to prevent any single person from enjoying the benefit of a good whenthe good is nonexcludable D. All of the above E. Both A and C

E. Both A and C

Which of the following statements is (are) correct? A. A good is characterized as excludable if it is not prohibitively costly to prevent people from using it B. If one person's use of a good diminishes another person's enjoyment of it, the good is excludable inconsumption. C. A sandwich would be considered a private good because it is excludable and rivalrous in consumption. D. All of the above E. Both A and C.

E. Both A and C

According to the textbook, which of the following statements about common resources is (are) correct? A. Congested non-toll roads are common resources because they are rivalrous and excludable. B. The Tragedy of the Commons occurs because common resources are rivalrous in consumption. C. The pollution of water and air can be viewed as an example of a common resource problem becauseboth air and water are rivalrous and nonexcludable. D. All of the above E. Both B and C

E. Both B and C

Which of the following statements is (are) correct? A. If general knowledge is not excludable then it is quite likely that profit maximizing firms in private marketswould choose to supply general knowledge to society. B. As with many public goods, determining the appropriate level of government support for the production ofgeneral knowledge is difficult because benefits are hard to measure C. If technological knowledge is excludable and general knowledge is not excludable, then it is likely thattechnological knowledge is a club good and general knowledge is a public good D. All of the above. E. Both B and C

E. Both B and C

Which of the following statements is (are) correct? The government provides public goods because A. private markets are incapable of producing public goods. B. free-riders make it too easy for private markets to supply the socially optimal quantity. C. markets are always better off with some government oversight. D. products provided by the government can be produced more efficiently. E. None of the above.

E. None of the above.

How can private stations afford to broadcast radio or television signals when, by putting up an antenna, noone can be excluded from receiving the signal while paying the station nothing

How can private stations afford to broadcast radio or television signals when, by putting up an antenna, noone can be excluded from receiving the signal while paying the station nothing

Alison, Benjamin, Charles, and Daisy all enjoy looking at flowers blooming in gardens in their neighborhood.The neighborhood association is considering planting a flower garden around the sign at the entrance to theneighborhood. Alison values the garden at $25, Benjamin at $30, Charles at $18 and Daisy at $40. Theflowers and labor for the garden cost $110. What should the neighborhood association do?

Plant the garden because people like flowers

Once it becomes obvious that a common resource is being overused,

it continues to be overused because individuals usually have no incentive to reduce their use of the good.

When a good is nonrivalrous in consumption, it means that

one person's use of the good does not diminishes another person's ability to use it.

For private goods allocated in markets,

prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.

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 and excludable, but national defense is nonrival and nonexcludable.