Microeconomics Chapter 11

Three business people meet for lunch at an Indian restaurant. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. When the food is delivered to the table, each person faces incentives similar to the a. consumption of a common resource good. b. production of a public good. c. consumption of a club good. d. production of a private good.

a. consumption of a common resource good.

Because of the free-rider problem, a. private markets tend to undersupply public goods. b. the federal government spends too many resources on national defense and not enough resources on medical research. c. fireworks displays have become increasingly dangerous. d. poverty has increased.

a. private markets tend to undersupply public goods

The Tragedy of the Commons results when a good is a. rival in consumption and not excludable. b. excludable and not rival in consumption. c. both rival in consumption and excludable. d. neither rival in consumption nor excludable

a. rival in consumption and not excludable.

When a free-rider problem exists, a. the market will devote too few resources to the production of the good. b. the cost of the good will always be more than the benefit of the good. c. the good will not be produced. d. entrepreneurs will eventually find a way to make free-riders pay their share.

a. the market will devote too few resources to the production of the good

The government provides public goods such as anti-poverty programs because a. private markets are incapable of producing these types of goods. b. free-riders make it difficult for private markets to supply the socially optimal quantity. c. markets are always better off with some government oversight. d. external benefits will accrue to private producers.

b. free-riders make it difficult for private markets to supply the socially optimal quantity

When property rights are not well established, a. private goods become public goods. b. markets fail to allocate resources efficiently. c. the distribution of private goods is unfair. d. government resources are used inefficiently

b. markets fail to allocate resources efficiently

When a good is excludable, a. one person's use of the good diminishes another person's ability to use it. b. people can be prevented from using the good. c. no more than one person can use the good at the same time. d. everyone will be excluded from using the good.

b. people can be prevented from using it

The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case? a. private goods b. club goods c. common resources d. public goods

c. common resources

Goods that are rival in consumption include both a. club goods and public goods. b. public goods and common resources. c. common resources and private goods. d. private goods and club goods.

c. common resources and private goods

Many species of animals are common resources, and many must be protected by law to keep them from extinction. Why is the cow not one of these endangered species even though there is such a high demand for beef? a. Cows reproduce at a high rate and have adapted well to their environment. b. Public policies protect cows from predators and diseases. c. Cows are privately owned, whereas many endangered species are owned by no one. d. There is a natural ecological balance between the birth rate of cows and human consumption.

c. cows are privately owned, whereas many endangered species are owned by no one

Who among the following is a free rider? a. Mickey buys groceries from the store where he works. b. Donald rides to work with Betsey, but he pays Betsey for gasoline and other travel-related expenses. c. Fred drives 20,000 miles a year on public streets, but he pays no more in property taxes than Barney, who only drives 1,000 miles. d. Wilma watches many public television programs, but she has never sent in a contribution to the station.

d. Wilma watches many public television programs, but she has never sent is a contribution to the station

Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except a. regulating the use or consumption of the common resource. b. taxing the use or consumption of the common resource. c. selling the common resource to a private entity. d. asking individuals to voluntarily reduce their use of the resource

d. asking individuals to voluntarily reduce their use of the resource

Which of the following would not be considered a private good? a. a sweater b. a slice of pizza c. a Toyota Prius d. cable TV service

d. cable service

If the use of a common resource is not regulated, a. no one can enjoy it. b. it will tend to be underused. c. property rights will be clearly defined. d. it will be overused.

d. it will be overused

Goods that are excludable include both a. club goods and public goods. b. public goods and common resources. c. common resources and private goods. d. private goods and club goods.

d. private goods and club goods