Econ 200 Exam 3

Suppose the size of the fish stock today is equal to 100 and each year the population of fish naturally increases by 10 percent. If overfishing occurs and each year 15 percent of the fish stock is caught, what will be the size of the fish stock in three years?

86

public goods

Goods that are neither excludable nor rival in consumption

Which statement concerning externalities is not true?

In a market that generates external benefits, the market equilibrium price is lower and the market equilibrium quantity is higher than the efficient equilibrium price and quantity.

What does diffusing costs among many people in order to provide benefits to a relative few cause? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

It decreases the probability that resources will be used efficiently.

Suppose R's market activity generates $50 worth of benefits for R, but imposes a $75 cost on S, who is external to the market. What is the socially efficient outcome?

R Should discontinue

In a small act of rebellion, Mandy got an eyebrow piercing, and to her disappointment, her parents loved it. Furthermore, her mother decided to get one too. The ladies' new facial jewelry is:

Rival and excludable

Coase Theorem

___ states that if transaction costs are low and property rights are clearly defined, private bargains will ensure that the market equilibrium is efficient even when there are externalities

whats an example of a free rider?

a person without health insurance visits the emergency room because no one can be turned away

Which of the following solutions allows for an efficient allocation of a public good?

advertising

Which of the following is not a common method by which the government controls pollution?

advertising firms to pollute less

Low transaction costs and well-defined property rights:

allow for private solutions to externality problems.

Which of the following is a private solution to an externality problem?

an application of the Coase theorem

A market for externalities might develop if property rights are:

clearly defined and transaction costs reduced.

Ariana buys a good that is nonrival and excludable. This good is a:

club good

Democracy encourages:

economic growth

Private goods can be provided by competitive markets because they are:

excludable

Cliff has been working an after-school job in order to buy a car. He is very careful with his money. When his mother offers to buy him a new laptop, however, he asks for one of the most expensive models on the market. After all, the costs of buying a new laptop have been:

externalized

private goods

goods that are both excludable and rival in consumption

common resource goods

have two characteristics: they are rival in consumption and nonexcludable

Which good or service is an example of a nonrival, private good or service?

iTunes Downloads

One of the difficulties of finding a Coase theorem solution to the problem of flu vaccine externalities is that

it would be too costly to identify and bring together all the parties involved.

club goods are likely to have _______ fixed costs and _______marginal costs

large; small

The private consumption of services that generate positive externalities, such as getting a college education, is usually _____ the socially optimal level of consumption.

less than

If the conditions of the Coase theorem are met, then a free market will:

maximize social surplus

If the conditions of the Coase theorem are met, then a free market will:

minimize deadweight loss.

The fact that public goods are _________ often leads to public goods being underprovided by markets.

non excludable

Public Goods with Exclusion

non rival and exclusive

On weekday evenings, James loves to make a huge bowl of popcorn and settle down in front of the television to watch family dramas on ABC and sitcoms on NBC. By watching channels such as ABC and NBC, James is enjoying:

nonrival and non excludable

People have little incentive to produce a public good because:

of the free rider problem

A worker earns about $800 per week after taxes. This income is called:

personal disposable income

the incumbent party wins when :

personal disposable income is growing the inflation rate is low the incumbent party has not been in too many terms in a row

A consumer buys a _____ good that is _________.

private good; excludable and rival

Television and radio broadcasts are examples of unique public goods because they are:

provided by markets

National defense is a _______ since it is _____ and nonexcludable.

public good; nonrival

When benefits are concentrated and costs are diffuse:

resources can be wasted on projects with low benefits and high costs

Lisa and Beth are out shopping when they notice a rack of leopard print harem pants. Both Lisa and Beth end up purchasing a pair. Beth's harem pants are a:

rival and excludable

Beekeepers charge farmers to use bees to pollinate crops. When bees pollinate crops like apples, the honey they produce is sweet and sells well. When bees pollinate almond crops, on the other hand, the honey they produce does not taste as good. Beekeepers can internalize the externalities by:

setting price according to the kind of crop the bees are pollinating.

Example of a public good

snowplowing the streets

the surplus of bystanders is included in what

social surplus

For command-and-control to be the best approach to controlling an externality, it ought to be true that:

success requires strict compliance.

Ariana buys a nonrival, private good. Which statement is TRUE?

the good is excludable

Every year Sally vaccinates her dog against rabies. Who receives the external benefits of Sally's decision to vaccinate her dog?

the other dogs at the dog park that they visit.

For command-and-control to be the best approach to controlling an externality, it ought to be true that:

the problem is well understood

the formula for political success works for what types of public policies?

trade quotas and tariffs agricultural subsidies and price supports government projects tax credits and reductions

Compared to private goods, the free market would ________ public goods.

underproduce

rationally ignorant

when the benefits of being informed are less than the costs of becoming informed, a person may be rationally ignorant