chapter 5 econ pt. 2

Which of the following is true?

All of the above are true.

Public goods are characterized by:

both b. and d.

In a competitive economy with no government sector:

there will be too few public goods produced.

Which of the following is false?

In adverse selection situations, it is rational for a seller with more information about a product to pro-vide a truthful and complete disclosure and make that fact known to a potential buyer.

Which of the following is true?

It is extremely difficult to limit the benefits of a public good to the people who pay for it.

Which of the following is a valid reason for the government rather than the market to finance the provi-sion of certain economic goods and services?

Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers; the government can use taxes to overcome this problem of nonpayment.

Of the following, the best example of a private good is:

a can of soda.

Leanne, a local taxpayer, and Crystal, a visitor from out of town, both attend a city-sponsored Fourth of July fireworks display at Prospect Park. Crystal is:

a free rider.

Which of the following goods is least likely to be provided by the private sector?

a good characterized by nonrivalry in consumption from which paying customers cannot be excluded

Which of the following would be an example of a nongovernmental solution to a problem associated with externalities?

a moral code against using sprinklers during a drought

If consumers were able to receive the full social benefits associated with the consumption of goods in-volving positive externalities, other things being equal, there would probably be:

an increase in consumption.

When city beautification programs are funded privately:

both a. and d. will likely occur

Public goods are those that are consumed:

by the paying and nonpaying public alike.

The reason why national defense is commonly provided by the government, while food is not, is that food:

can easily be withheld from those who refuse to pay for it.

Which of the following is the best example of a public good?

city street lights

Which of the following is a rival good that is nonexcludable?

common resource

As an additional consumer obtains the benefits of a public good such as national defense, the benefits to existing consumers:

do not change.

The free-rider problem arises when:

goods can't be provided exclusively to paying customers.

A free-rider problem arises whenever:

goods cannot be provided exclusively to those who pay for them

A free-rider problem arises whenever:

goods cannot be provided exclusively to those who pay for them.

If the production of a particular good involves significant external costs, to force the externality to be internalized the government might:

impose a tax on production of the good in order to decrease production.

An economist would be most likely to argue that U.S. national defense should be funded through tax revenues because:

individuals who refuse to contribute to a national defense fund cannot be excluded from benefiting from national defense.

Public goods, like national defense, are usually funded through government because:

it is prohibitively difficult to withhold national defense from someone unwilling to pay for it.

Which of the following is an example of a public good?

national defense

An example of a public good is:

national defense.

The consumption of public goods is

non-excludable and non-rivalrous

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

offer a subsidy for production of the good in order to increase production.

The free rider problem suggests that an individual will tend to:

produce less than the optimal quantity of a public good.

Los Angeles Mayor James Hahn believes strongly that education provides great benefits to the commu-nity and urges the state government to provide the district with more money. An economist would say that this reflects Mayor Hahn's belief that:

there are positive external benefits associated with education.

Assume that production of a good generates external benefits for others. The equilibrium price of the good will be ____ and the equilibrium quantity ____ for efficient resource allocation.

too high; too low.

Where a free-rider problem exists, goods tend to be:

underproduced.

The determination of which goods are public goods depends on

whether it is possible to exclude additional users from consuming the good if they do not pay for it.

The determination of which goods are public goods depends on:

whether it is possible to exclude additional users from consuming the good if they do not pay for it.