ECON Exam 4

A free rider is a person who a. receives the benefit of a good but avoids paying for it. b. can produce a good at no cost. c. rides public transit regularly. d. will only purchase a product on sale.

A

A free rider is a person who a. receives the benefit of a good but avoids paying for it. b. rides public transit regularly. c. will only purchase a product on sale. d. can produce a good at no cost.

A

A lighthouse might be considered a private good if a. the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse. b. ships are able to enjoy the benefits of the lighthouse without paying for the benefit. c. there is a second lighthouse nearby, thus preventing a monopoly. d. a nearby port authority is able to avoid paying any fees to the lighthouse owner.

A

A positive externality arises when a person engages in an activity that has a. a beneficial effect on a bystander who does not pay the person who causes the effect. b. an adverse effect on a bystander who is not compensated by the person who causes the effect. c. a beneficial effect on a bystander who pays the person who causes the effect. d. an adverse effect on a bystander who is compensated by the person who causes the effect.

A

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as :a. private parties can bargain with sufficiently low transaction costs. b. government assigns property rights to the harmed party. c. businesses determine an appropriate level of production. d. the externalities that are present are positive, not negative.

A

Economic theory assumes that voters, politicians, and other political participants are largely motivated by a. personal self-interest. b. altruism. c. a desire to promote the general welfare. d. a desire to promote allocative economic efficiency.

A

Negative externalities lead markets to produce a. greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels. b. efficient output levels and positive externalities lead markets to produce greater than efficient output levels. c. smaller than efficient output levels and positive externalities lead markets to produce greater than efficient output levels. d. greater than efficient output levels and positive externalities lead markets to produce efficient output levels.

A

The gasoline tax a. can be viewed as a corrective tax aimed at multiple negative externalities associated with driving. b. is similar to most other taxes in that it causes deadweight losses. c. produces the unfortunate side-effect of making the roads more dangerous. d. can be viewed as a command-and-control policy aimed at discouraging people from driving.

A

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

A

Which of the following is not a public good? a. patented technological knowledge b. general knowledge c. the elimination of poverty d. national defense

A

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? a. tablet computer, national defense b. tablet computer, gym membership at a gym that always has plenty of open equipment and classes c. online music subscription, streetlight d. congested nontoll road, national defense

A

Without government intervention, public goods tend to be a. underproduced and common resources tend to be overconsumed. b. overproduced and common resources tend to be underconsumed. c. underproduced and common resources tend to be underconsumed. d. overproduced and common resources tend to be overconsumed.

A

A cable television broadcast of a movie is a. excludable and rival in consumption. b. excludable and not rival in consumption. c. not excludable and rival in consumption. d. not excludable and not rival in consumption.

B

A command-and-control policy is another term for a a. pollution permit. b. government regulation. c. corrective tax. d. Both a and b are correct.

B

Advocates of antipoverty programs claim that a. the government has good information about what people are willing to pay to eliminate poverty. b. fighting poverty is a public good. c. private sector will incur higher costs than the public sector for these programs. d. All of the above are correct.

B

Economic policy that appears to be ideal in an economics textbook may not be the final policy that is approved by elected politicians because a. only policies advocated by the President's Council of Economic Advisors receive enough national attention to interest politicians .b. sometimes a politician's self interest may conflict with the national interest. c. Economists cannot explain why politicians do not implement the ideas from their textbooks. d. economics professors have a notoriously low voting rate.

B

If education produces positive externalities and the government does not intervene in the market, we would expect a. the equilibrium price to be higher than the optimal price. b. the equilibrium quantity to be lower than the optimal level. c. the equilibrium quantity to be higher than the optimal level. d. both a and b are correct

B

Knowledge that is patented is a a. private good, whereas knowledge that is not patented is a club good. b. club good, whereas knowledge that is not patented is a public good. c. public good, whereas knowledge that is not patented is a common resource. d. common resource, whereas knowledge that is not patented is a private good.

B

The field of political economy a. applies the methods of political science to macroeconomics. b. is relevant to the issue of how active government should be in economic matters. c. applies the methods of political science to microeconomics. d. integrates psychological insights to better understand individual choices.

B

The field of political economy applies the methods of a. political science to study how the economy works b. economics to study how government works. c. psychology to study how government works. d. psychology to study how the economy works.

B

When a free-rider problem exists, a. entrepreneurs will eventually find a way to make free-riders pay their share. b. the market will devote too few resources to the production of the good.c. the good will not be produced.d. the cost of the good will always be more than the benefit of the good.

B

A cheeseburger is a a. public good, because it is excludable and rival in consumption. b. public good, because it is rival in consumption but not excludable. c. private good, because it is excludable and rival in consumption. d. common resource, because it is rival in consumption but not excludable.

C

A negative externality arises when a person engages in an activity that has a. a beneficial effect on a bystander who does not pay the person who causes the effect .b. an adverse effect on a bystander who is compensated by the person who causes the effect. c. an adverse effect on a bystander who is not compensated by the person who causes the effect. d. a beneficial effect on a bystander who pays the person who causes the effect.

C

All externalities a. cause equilibrium prices to be too high. b. benefit producers at the expense of consumers. c. cause markets to fail to allocate resources efficiently. d. cause equilibrium prices to be too low.

C

Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so? a. to decrease taxes b. to increase consumption c. to prevent overuse d. to fight poverty

C

If the median voter theorem holds, a. a Borda count will violate the principle of transitivity. b. the Condorcet paradox also holds. c. minority views will not receive much consideration. d. All of the above are correct.

C

Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes. Cathy values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? :a. Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke .b. Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke. c. Mary pays Cathy $16 so that Mary can smoke. d. Mary pays Cathy $14 so that Mary can smoke.

C

National defense is provided by the government because a. products provided by the government are produced more efficiently. b. it is impossible for private markets to produce public goods. c. free-riders make it difficult for private markets to supply the socially optimal quantity. d. public goods increase government revenues.

C

National defense is provided by the government because a. public goods increase government revenues. b. it is impossible for private markets to produce public goods. c. free-riders make it difficult for private markets to supply the socially optimal quantity. d. products provided by the government are produced more efficiently.

C

One implication of the Condorcet paradox is a. that the order in which things are voted on is irrelevant. b. that when there are only two items being voted on the order matters. c. that the order in which things are voted on can affect the result. d. that you do not want to be in charge of arranging which items are voted upon first.

C

Research into new technologies provides a a. negative externality, and too few resources are devoted to research as a result. b. positive externality, and too many resources are devoted to research as a result. c. positive externality, and too few resources are devoted to research as a result. d. negative externality, and too many resources are devoted to research as a result.

C

Which of the following goods is the best example of a public good? a. cable TV services that are provided by a privately-owned firm that is regulated by the government of the city in which it operates b. garbage-collection services that are provided by a municipal government c. music that is broadcast over the airwaves by a privately-owned FM radio station d. electricity that is provided to farmhouses by a rural electric cooperative

C

Which of the following is a lesson from the Condorcet paradox? a. Majority voting always indicates what outcome a society really wants. b. If voters are choosing a point along a line, then majority rule will pick the most preferred point of the median voter. c. When there are more than two options, deciding the order in which to vote can have a powerful influence over the outcome of an election. d. Under certain conditions, there is no scheme for aggregating individual preferences.

C

Which of the following statements is not correct? a. Government policies may improve the market's allocation of resources when negative externalities are present. b. A positive externality is an example of a market failure. c. Without government intervention, the market will tend to undersupply products that produce negative externalities. d. Government policies may improve the market's allocation of resources when positive externalities are present.

C

A community has five voters who are interested in only one issue: the government's spending on local parks. If Andre would like the government to spend $12,000 on parks, Brandon prefers $7,000, Charlene prefers $4,000, Dennis prefers $2,000, and Ernie prefers $0, how much spending would a politician seeking to win the election select when running against one opponent? a. $2,000 b. $12,000 c. $7,000 d. $4,000

D

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? a. Lobsters are rival but not excludable .b. The lobster population is an example of the tragedy of the commons. c. Reducing the quota on the number of lobsters any fisher can catch would have a protective effect on the lobster population. d. If left unregulated, the lobster population will likely increase.

D

According to the median voter theorem, majority rule will a. produce an outcome that is inconsistent with transitive preferences. b. produce the outcome least preferred by the median voter. c. always produce an inconclusive outcome. d. produce the outcome most preferred by the median voter.

D

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to a. continue to be messy and force you to move out. b. stop her messy habits or else move out. c. demand payment of at least $60 but no more than $80 to clean up after herself. d. pay you at least $60 but less than $80 to live with the clutter.

D

Because public goods are a. excludable, people do not have an incentive to be free riders. b. not excludable, people do not have an incentive to be free riders. c. excludable, people have an incentive to be free riders. d. not excludable, people have an incentive to be free riders.

D

In which of the following cases is the Coase theorem most likely to solve the externality? a. Chemicals from manufacturing plants in the Midwest are causing acid rain in Canada. b. Polluted water runoff from farms is making residents of a nearby town sick. c. Industrialization around the world is causing global warming. d. Ed is allergic to his roommate's cat.

D

Josiah installed a metal sculpture in his front yard. A negative externality arises if the sculpture a. ​increases the value of other properties in the neighborhood. b. ​is visually appealing to Josiah's neighbors. c. ​decreases the value of Josiah's home. d. ​creates a safety hazard for neighborhood children.

D

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

D

Private markets fail to account for externalities because a. sellers include costs associated with externalities in the price of their product. b. externalities don't occur in private markets. c. the government cannot easily estimate the optimal quantity of pollution. d. decisionmakers in the market fail to include the costs of their behavior to third parties.

D

Recent developments in political economy a. illustrate the resolute nature of democracy. b. render much of the traditional field of economics obsolete. c. render much of the traditional field of political science obsolete. d. point to the fact that government is a less-than-perfect institution.

D

The median voter theorem states that a. ​the median voter will hold the decisive vote in an election. b. ​the median voter will never hold the decisive vote in an election. c. ​policies that are enacted will be least preferable to the median voter. d. ​policies that are enacted will be most preferred by the median voter.

D

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

D

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

D

Who among the following is a free rider? a. Bert takes the commuter rail to work, but he purchases the discounted monthly passes rather than buying tickets each day. b. Grover sends his 5 children to a private school rather than to the public school in his neighborhood. c. Oscar goes to Elmo's house to watch a football game on the local television channel. d. Ernie listens to National Public Radio, but does not contribute to any fundraising efforts.

D

socially optimum quantity

where social cost crosses the demand curve

equilibrium without government regulation

where the demand curve intersects the supply (private cost) curve