Econ 201 CHAPTER 15

1) A market in which there are neither spillover benefits nor spillover costs is: A) efficient. B) inefficient. C) efficient but not equitable. D) impossible.

A

11) A spillover benefit is the benefit experienced by people who: A) do not decide how much of the good to produce or consume. B) did not know why they are experiencing the benefit. C) decide how much of the good to produce or consume. D) consume the good.

A

13) When people try to benefit from a public good without paying for it we call it the: A) free-rider problem. B) duopolists' dilemma. C) public goods problem. D) taxation problem.

A

4) A private good is a good that: A) is consumed by a single person or household. B) cannot be used by private citizens. C) can not result in external benefits or costs to those who don't consume. D) is available for everyone to consume, regardless of who pays.

A

6) A good that is consumed by a single person or household is called a(n): A) private good. B) external good. C) public good. D) spillover good.

A

15) Offering contributors private goods such as coffee mugs, books, or magazine subscriptions will ________ the free-rider problem and lead to a ________ level of contribution to the public good. A) reduce; smaller B) reduce; larger C) increase; smaller D) increase; larger

B

20) What is the best explanation for the fact that the only two political candidates in an election often have very similar stands on the issues during an election? A) They are logrolling. B) They are behaving according to the median voter rule. C) Democrats and Republicans actually agree on most issues. D) They need to please special interest groups in order to be elected.

B

7) An example of a good that is non-rival in consumption is: A) a music CD. B) a radio broadcast of a song. C) a ticket to a concert. D) a guitar.

B

8) An example of a good that is rival in consumption is: A) a radio program. B) a copy of an economic textbook. C) an economics web page. D) a poster of famous economists.

B

14) The free-rider problem occurs for: A) private goods and public goods. B) private goods but not public goods. C) public goods but not private goods. D) neither public nor private goods.

C

17) The diversion of asteroids is a public good because: A) no individual has enough money to develop the technology to divert asteroids on his or her own. B) individuals would not contribute money to divert asteroids. C) everyone on earth would benefit from asteroid diversion whether they contribute or not. D) none of the above; asteroid diversion is not a public good

C

18) Public choice economics studies: A) what individuals choose for themselves. B) how individuals are affected by advertising. C) how governments operate. D) the voter theory.

C

3) A public good is a good that: A) is consumed by a single person or household. B) cannot be used by private citizens. C) is available for everyone to consume, regardless of who pays. D) is provided by the government.

C

5) A good that is available for everyone to consume, regardless of who pays and who doesn't, is called a: A) private good. B) external good. C) public good. D) spillover good.

C

9) An example of a good that is excludable is: A) a park. B) a river. C) a boat. D) clean air.

C

10) An example of a good that is excludable is: A) broadcast television. B) an outdoor sculpture visible from the street. C) an aerial fireworks display. D) a television set.

D

12) The free-rider problem implies that: A) each person will pay the full cost of the public good. B) nobody wants the public good. C) everybody will pay a portion of the cost of the public good. D) each person will try to benefit from the public good without paying for it.

D

16) Arranging matching charitable contributions will ________ the free-rider problem and lead to a ________ level of contribution to the public good. A) increase; smaller B) increase; larger C) reduce; smaller D) reduce; larger

D

19) The median voter rule says that: A) people "vote with their feet." B) the median voter will not bother to vote in the election, it is extremists who vote. C) the median voter never gets what he or she wants in an election. D) government decisions will reflect the preferences of the median voter.

D

2) A government can promote efficiency by intervening in a market in which there are: A) no spillovers. B) spillover costs. C) spillover benefits. D) either spillover costs or spillover benefits.

D

23) The self-interest model of government: A) suggests that government officials are selfish. B) explains why there are limits on government taxation and spending. C) shows how the theory of rent-seeking applies to governments. D) All of the above are correct.

D

Median-voter rule--

The choices made by the government will match the preferences of the median voter.

Public Goods:

a good that is available to everyone to consume, regardless of who pays and who doesn't

Private Goods:

a good that is consumed by a single person or household

Public Choice Economics --

how governments actually operate. Median voter rule suggests that choices made by government reflects the preferences of the median voter.

Public Goods are:

nonrival in consumption (available for everyone to consume) and nonexcludable (it is impractical to exclude people who don't pay).

Free-Rider Problem:

person will try to get the benefit of a public good without paying for it, i.e., get a free ride at the expense of others who actually pay for the good.

Private Goods are:

rival in consumption (only one person can consume the good) and excludable (it is possible to exclude a person who does not pay for the good).

Alternative models of governments --

self-interest and special interests.

Excludable goods-

to prevent people (consumers) who have not paid for it from having access to it