micro ch.11

Suppose each of 20 neighbors on a street values street repairs at €3,000. The cost of the street repair is €40,000. Is it efficient for the government to tax the residents €2,000 each and repair the road?

yes

A public good is

Neither rival nor excludble

A good produced by a natural monopoly is

Not rival but excludable

A private good is

Both rival and excludable

A common resource is neither rival nor excludable, true or false?

False

A public good is both rival and excludable, true or false?

False

Goods produced by a natural monopoly are free to the consumer of the good, true or false?

False

If the local government sells apples at a roadside stand, the apples are public goods because they are provided by the government, true or false?

False

National defence is a classic example of a common resource, true or false?

False

The socially optimal price for a fishing licence is zero, true or false?

False

When the government uses cost-benefit analysis 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, true or false?

False

If one person's consumption of a good diminishes other people's use of the good, the good is said to be

Rival

A common resource is

Rival but not excludable

A fireworks display in the centre of large private park is a good provided by natural monopoly, true or false?

True

An apple sold in a grocery store is a private good, true or false?

True

Common resources are overused because common resources are free to the consumer, true or false?

True

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 resource, true or false?

True

If someone owned the property rights to clean air, that person could charge for the use of the clean air in a market for clean air and, thus, air pollution could be reduced to the optimal level, true or false?

True

Private markets have difficulty providing public goods due to the free rider problem, true or false?

True

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 or false?

True

The government should continue to spend to improve the safety of our roads until there are no deaths from car accidents, true or false?

True

A negative externality affects market efficiency in a manner similar to

a common resource

A person who regularly watches BBC television programmes in the UK but fails to pay their TV licence fee is known as

a free rider

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

a national park

A congested toll road is

a private good

Which of the following are potential solutions to the problem of air pollution? Grant rights of the clean air to citizens so that firms must purchase the right to pollute. Auction off pollution permits. Regulate the amount of pollutants that firms can put in the air

all of these answers

The Tragedy of the Commons is a parable that illustrates why

common resources are overconsumed

If a person can be prevented from using a good, the good is said to be

excludable

Which of the following is an example of a public good? hot dogs at a picnic whales in the ocean national defence apples on a tree in a public park

national defence

A positive externality affects market efficiency in a manner similar to a

public good

A free rider is a person who

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

When governments employ cost-benefit analysis to help them decide whether to provide a public good, measuring benefits is difficult because

respondents to questionnaires have little incentive to tell the truth

When markets fail to allocate resources efficiently, the ultimate source of the problem is usually

that property rights have not been well established

Public goods are difficult for a private market to provide due to

the free rider problem

Suppose that 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 that 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

€500,000 or more.