Ch 11

Which of the following is not a common resource? Elephants in the wild A narrow trail in a public park A vegetable garden Neither a nor b is a common resource.

a vegetable garden

The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of fertilizer is 0.008. The cost of imposing a regulation that would ban the chemical is $32 million. If the value of a human life is equal to $10 million, how many people must the policy affect in order for the benefits to exceed the costs? 256 401 3201 4001

401

Refer to Figure 11-1. For which two boxes is it the case that externalities arise because something of value has no price attached to it? Box A and Box B Box A and Box C Box B and Box D Box C and Box D

Box C and Box D

Refer to Figure 11-1. Emma's use of good x does not affect anyone else's use of good x. Neither Emma nor anyone else can be prevented from using the good. Good x is an example of the type of good that belongs in Box A, which represents private goods. Box B, which represents common resources. Box C, which represents common resources. Box D, which represents public goods.

Box D, which represents public goods.

Which of the following is usually true about government-provided goods? These goods have a zero opportunity cost. These goods are not scarce. People do not have to pay an explicit fee to enjoy these goods. The invisible hand is at work to ensure these goods are provided in the market

People do not have to pay an explicit fee to enjoy these goods.

The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case? Private good Club good Common resource Public good

Private Good

What causes the Tragedy of the Commons? Social and private incentives are the same. Social and private incentives differ, and common resources are not rival in consumption and are not excludable. Common resources are not rival in consumption and are not excludable. Social and private incentives differ, and common resources are not excludable but are rival in consumption.

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

Which of the following is an example of the Tragedy of the Commons? The number of professional football teams increases to the point where the quality of the games decreases, as does television viewership. The number of satellites increases to the point where they begin running into each other. Disney World becomes so crowded that it institutes a lottery for admissions. A tiger breeding program becomes so successful that local zoos have to build additional exhibits so that visitors can view the cats.

The number of satellites increases to the point where they begin running into each other.

Which of the following is not a typical solution to the "Tragedy of the Commons?" Taxing the use of the common resource Turning the common resource into a club good Turning the common resource into a private good Regulating the use of the common resource

Turning the common resource into a club good

Before considering any public project, the government should only measure the total benefits of the project. only measure the cost of the project. conduct a cost-benefit analysis and compare the total cost and total benefits of the project. infer that citizens who vote for a project are willing to pay equally for it.

conduct a cost-benefit analysis and compare the total cost and total benefits of the project.

If the government decides to build a new highway, the first step would be to conduct a study to determine the value of the project. The study is called a budget analysis. project analysis. reimbursement analysis. cost-benefit analysis.

cost benefit analysis

The goal of requiring licenses for hunting and fishing is to reduce the use of a common resource. ensure that the people hunting and fishing are qualified. promote hunting and fishing. monitor compliance with federal gun laws.

duce the use of a common resource.

Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking, and the trash cans overflow with food wrappers on summer afternoons. Otherwise, it is a great place. The park is a common resource because people can be prevented from using it. access is limited due to driving distances. if too many people use it, one person's use diminishes other peoples' use. anyone can use it without affecting anyone else.

if too many people use it, one person's use diminishes other peoples' use.

Private decisions about consumption of common resources and production of public goods usually lead to an efficient allocation of resources and external effects. efficient allocation of resources and no external effects. inefficient allocation of resources and external effects. inefficient allocation of resources and no external effects.

inefficient allocation of resources and external effects.

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

markets fail to allocate resources efficiently.

A traffic light at an intersection is rival and excludable in consumption. not rival but excludable in consumption. rival but not excludable in consumption. not rival and not excludable in consumption.

not rival and not excludable in consumption.

A television broadcast is an example of a good that is private. not rival in consumption. social. excludable.

not rival in consumption

The U.S. military defends Jacob from foreign conflict. The fact that Jacob enjoys this protection does not detract from other Americans' enjoyment of it. For this reason, we say that national defense is excludable. not excludable. rival in consumption. not rival in consumption.

not rival in consumption.

For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is advertising. quality. reputation. price.

price

Goods that are excludable include both club goods and public goods. public goods and common resources. common resources and private goods. private goods and club goods.

private goods and club goods

Because of the free-rider problem, private markets tend to undersupply public goods. the federal government spends too many resources on national defense and not enough resources on medical research. firework displays provided by private markets have become increasingly popular. poverty can easily be eliminated through private charity.

private markets tend to undersupply public goods.

People cannot be prevented from using a good if the good is a private good or a public good. private good or a common resource. public good or a common resource. public good or a club good.

public good or common resource

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

rival in consumption and not excludable.

The overuse of a common resource relative to its economically efficient use is called the free-rider problem. the Tragedy of the Commons. a public good. cost-benefit analysis.

the Tragedy of the Commons

A cost-benefit analysis of a highway is difficult to conduct because analysts cannot estimate the explicit cost of a project that has not been completed. are unlikely to have access to costs on similar projects. are not able to consider the opportunity cost of resources. will have difficulty estimating the value of the highway.

will have difficulty estimating the value of the highway.

Producers have little incentive to produce a public good because the social benefit is less than the private benefit. the social benefit is less than the social cost. there is a free-rider problem. there is a Tragedy of the Commons.

there is a free-rider problem.

Under which of the following scenarios would a park be considered a common resource? Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use. Visitors can enter the park free of charge and there are always plenty of empty picnic tables. Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.

Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.

A toll on a congested road is in essence an interstate highway subsidy. a hidden tax. a gasoline tax. a corrective tax.

a corrective tax

A lighthouse is typically considered to be a public good because the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse. there is rarely another lighthouse nearby to provide competition. a nearby port authority cannot avoid paying fees to the lighthouse owner. all passing ships are able to enjoy the benefits of the lighthouse without paying.

all passing ships are able to enjoy the benefits of the lighthouse without paying.

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could allow individual shepherds to choose their own flock sizes. internalize the externality by subsidizing the production of sheep's wool. auction off a limited number of sheep-grazing permits. wait until the market corrects the problem.

auction off a limited number of sheep-grazing permits.

Refer to Figure 11-1. A membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box A. B. C. D.

b

Brad owns 5 acres of land. Brad sells the land to a real estate developer who builds a subdivision with 10 houses. The land is an example of a good that is both rival in consumption and excludable. neither rival in consumption nor excludable. excludable, but not rival in consumption. rival in consumption, but not excludable.

both rival in consumption and excludable.

A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the Atlantic waters south of Cape Cod based on a study of the lobster population. Which of the following statements is not correct? Lobsters are rival but not excludable. The lobster population is an example of the tragedy of the commons. Reducing the quota on the number of lobsters any fisher can catch would have a protective effect on the lobster population. If left unregulated, the lobster population will likely increase.

If left unregulated, the lobster population will likely increase.

Which of the following pairs of goods includes a good that is excludable and rival in consumption as well as a good that is not excludable and not rival in consumption? Tablet computer, membership at a gym that always has plenty of open equipment and classes Tablet computer, national defense Congested nontoll road, national defense Online music subscription, streetlight

Tablet computer, national defense

Which of the following is a disadvantage of government provision of a public good? The government lacks information about the value people place on the good. The government does not provide enough of any public good. The private sector can provide all public goods at a lower cost. There are no disadvantages of government provision of a public good.

The government lacks information about the value people place on the good.

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. On these days, electricity is excludable, but nonrival in consumption. not excludable, but rival in consumption. excludable and rival in consumption. not excludable and nonrival in consumption.

excludable and rival in consumption.

Private goods are both excludable and nonrival in consumption. nonexcludable and rival in consumption. excludable and rival in consumption. nonexcludable and nonrival consumption.

excludable and rival in consumption.

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. externalities or as a problem of private goods. the overprovision of public goods or as a problem of the underprovision of private goods. club goods or as a problem that arises when the quantity of excludable goods exceeds the socially-efficient quantity.

externalities or as a problem of common resources.

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

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.

The privately-owned school system in Smalltown has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Because the benefit that each citizen receives from having an educated community is a public good, which of the following would not be correct? The free-rider problem causes the private market to undersupply education to the community. The government can potentially help the market reach a socially optimal level of education. A tax increase to pay for education could potentially make the community better off. The private market is the best way to supply education.

the private market is the best way to supply education