ECO157 - Chap 11 - Exam II

Which of the following is not a characteristic of a public good? a. Because it is a free good, there is no opportunity cost. b. Its benefits cannot be withheld from anyone. c. It is not diminished or depreciated as additional people consume the good. d. It is not excludable.

a. Because it is a free good, there is no opportunity cost.

Who among the following is a free rider? a. Ernie listens to National Public Radio, but does not contribute to any fundraising efforts. b. Grover sends his five children to a private school rather than to the public school in his neighborhood. c. Bert takes the commuter rail to work, but he purchases the discounted monthly passes rather than buying tickets each day. d. Oscar goes to Elmo's house to watch a football game on the local commercial television channel.

a. Ernie listens to National Public Radio, but does not contribute to any fundraising efforts.

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

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

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

a. inefficient allocation of resources and external effects.

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

a. the Tragedy of the Commons.

Private companies are most likely to invest in medical research if a. they will produce a specific product for which they may receive a patent. b. there is no government intervention in the market for medical products. c. others will benefit from their discoveries. d. they will produce general knowledge.

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

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 a. weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable. b. national defense is rival in consumption and excludable, but weapons are not rival in consumption and not excludable. c. resources would be used more efficiently if the government produced the weapons. d. resources would be used more efficiently if private firms provided national defense.

a. weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.

Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield? a. 1 acre b. 3 acres c. 4 acres d. 2 acres

b. 3 acres

The town of Isle is on a small island connected to Big City by a single bridge. Most of the residents of Isle work in Big City. As a result, the bridge becomes very congested for two hours each day at the typical morning and evening commute times. Which of the following policies considered by the mayor of Isle would likely be most efficient in alleviating the congestion? a. Any vehicle crossing the bridge at any time must have a sticker paid for with a one-time fee of $25. b. A variable toll for the bridge payable only by vehicles crossing the bridge during the congested commute times. c. A fixed toll for the bridge payable by every vehicle crossing the bridge at all days and times. d. A press conference in which the mayor requests that people try to cross the bridge earlier or later than the typical commute times.

b. A variable toll for the bridge payable only by vehicles crossing the bridge during the congested commute times.

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

b. Turning the common resource into a club good

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

b. common resources and private goods.

A traffic light at an intersection is a. rival and excludable in consumption. b. rival but not excludable in consumption. c. not rival and not excludable in consumption. d. not rival but excludable in consumption.

c. not rival and not excludable in consumption.

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to a. 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. b. 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. c. 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. d. 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.

c. 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 provision of a public good generates a a. positive externality, as does the use of a common resource. b. negative externality and the use of a common resource generates a positive externality. c. positive externality and the use of a common resource generates a negative externality. d. negative externality, as does the use of a common resource.

c. positive externality and the use of a common resource generates a negative externality.

A textbook is a a. private good and the knowledge that one gains from reading the book is a common resource. b. common resource and the knowledge that one gains from reading the book is a private good. c. private good and the knowledge that one gains from reading the book is a public good. d. common resource and the knowledge that one gains from reading the book is a public good.

c. private good and the knowledge that one gains from reading the book is a public good.

Four friends decide to meet at a Chinese restaurant for dinner. 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. A Tragedy of the Commons problem is likely for each of the following reasons except a. each person has an incentive to eat as much as possible since their individual rate of consumption will not affect their individual cost. b. when one person eats, he may not take into account how his choice affects his friends. c. there is an externality associated with eating the food on the table. d. each dish would be both excludable and rival in consumption.

d. each dish would be both excludable and rival in consumption.

The failure of markets to adequately protect the environment can be viewed either as a problem of a. the overprovision of public goods or as a problem of the underprovision of private goods. b. externalities or as a problem of private goods. c. club goods or as a problem that arises when the quantity of excludable goods exceeds the socially-efficient quantity. d. externalities or as a problem of common resources.

d. externalities or as a problem of common resources.

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

d. private goods and club goods.

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

d. there is a free-rider problem.

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

d. will have difficulty estimating the value of the highway.