ECON 2302_Chpt 11 MC Practice Test

Which of the following would not be considered a private good? a. a pair of jeans b. an apple c. a Honda Civic d. cable TV service

cable TV service

The Great Lakes are a. private goods. b. natural monopolies. c. common resources. d. public goods.

common resources

Goods that are not excludable are usually a. higher priced than excludable goods. b. higher priced than rival goods. c. in short supply. d. free of charge.

free of charge

Suppose a human life is worth $10 million. Installing a better lighting system in the city park would reduce the risk of someone being murdered there from 2.3 to 1.8 percent over the life of the system. The city should install the new lighting system if its cost does not exceed a. $50,000. b. $180,000. c. $230,000. d. $500,000.

$50,000

Before considering any public project, the government should (i) compare the total cost and total benefits of the project. (ii) conduct a cost-benefit analysis. (iii) infer that citizens who vote for a project are willing to pay equally for it. a. (i) only b. (ii) only c. (i) and (ii) only d. (i), (ii), and (iii)

(i) and (ii) only

Refer to Table 11-1. Suppose the cost to build the park is $30 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?" a. 0 acres b. 1 acre c. 2 acres d. 3 acres

2 acres

Which of the following statements is not correct? a. Medical research can be an example of a public good. b. The private market will tend to undersupply public goods. c. The free-rider problem occurs when a good is nonexcludable. d. All goods provided by the government are public goods.

All goods provided by the government are public goods

Suppose that the Town of Podunk is considering hiring an additional police officer. The reduction in crime is estimated to be worth $10 for each of Podunk's 4,500 residents. What should the city do? a. Hire the police officer because additional safety is priceless. b. Hire the police officer if the cost of the new officer is less than $45,000. c. Do not hire the police officer because the costs exceed the benefits. d. Hire the police officer only if the benefit to the residents exceeds $4,500.

Hire the police officer if the cost of the new officer is less than $45,000

A toll collected from each car traveling during rush hour on a congested road is an effective correction to the Tragedy of the Commons for all of the following reasons except a. The toll provides an incentive for commuters to drive at times other than rush hour. b. The toll provides an incentive for commuters to use public transit rather than driving. c. The toll provides an incentive for commuters to drive more fuel-efficient cars. d. The toll provides an incentive for commuters to car-pool.

The toll provides an incentive for commuters to drive more fuel-efficient cars

Consider the following problems: Overcrowded public highways, overfishing in the ocean, polluted air, and the near-extinction of the wild rhinoceros. What do these problems have in common? a. Private markets could easily solve them if governments left the markets alone. b. They would all go away if the government sponsored an intensive public-information campaign. c. They are all the result of a failure to establish clear property rights over something of value. d. They are all the result of a failure of corrective taxes.

They are all the result of a failure to establish clear property rights over something of value

Which of the following statements is correct? a. Common resources are nonexcludable and nonrival in consumption. b. Uncongested toll roads are an example of the free rider problem. c. When African elephants were privatized, the survival of the species improved. d. Fish in the ocean are excludable but nonrival in consumption

When African elephants were privatized, the survival of the species improved

An overcrowded beach is an example of a. a positive externality. b. a Tragedy of the Commons. c. an environmentally inefficient allocation of resources. d. an economically unfair allocation of resources.

a Tragedy of the Commons

On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. An overcrowded picnic area is an example of a. a private good. b. a natural monopoly. c. a Tragedy of the Commons. d. public good.

a Tragedy of the Commons

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could a. allow individual shepherds to chose their own flock sizes. b. internalize the externality by subsidizing the production of sheep's wool. c. auction off a limited number of sheep-grazing permits. d. wait until the market corrects the problem.

auction off a limited number of sheep-grazing permits

Economists think that the best way to determine the value of a human life is to a. evaluate the value of a person's expected earnings in the labor market. b. evaluate the risks people are willing to take and what they would have to be paid to take them. c. determine a person's accumulated wealth at the time of death. d. do nothing; human life is priceless.

evaluate the risks people are willing to take and what they would have to be paid to take them

In deciding whether a good is a public good, one must determine the a. incomes of those who benefit from the good. b. value of the external benefits that accrue to resource owners. c. excludability of the good. d. All of the above are correct.

excludability of the good

Both private goods and natural monopolies are a. rival in consumption. b. nonrival in consumption. c. excludable. d. nonexcludable.

excludable

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.

excludable and not rival in consumption

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. On these days, electricity is a. excludable, but nonrival in consumption. b. not excludable, but rival in consumption. c. excludable and rival in consumption. d. not excludable and nonrival in consumption.

excludable and rival in consumption

The free-rider problem a. forces the supply of a public good to exceed its demand. b. results in common resources becoming natural monopolies. c. explains why many local governments supply public goods. d. results in public goods becoming private goods.

explains why many local governments supply public goods

When something of value has no price attached to it, a. externalities will be present. b. production of the product has no cost. c. government should not intervene to produce the product. d. private companies will eventually produce the product, and the good will no longer be free.

externalities will be present

If the use of a common resource is not regulated, a. no one can enjoy it. b. it will tend to be underused. c. property rights will be clearly defined. d. it will be overused.

it will be overused

One way to eliminate the Tragedy of the Commons is to a. increase law enforcement in public areas. b. limit access to the commons. c. increase access to the commons. d. decrease taxes.

limit access to the commons

The national defense of the United States is not rival because a. my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States. b. my enjoyment of the national defense does diminish your enjoyment of the national defense of the United States. c. once the nation is defended, it is impossible to prevent any single person from enjoying the benefit of this defense. d. once the nation is defended, it is possible to prevent any single person from enjoying the benefit of this defense.

my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States

Goods that are not rival in consumption include both a. private goods and common resources. b. natural monopolies and public goods. c. common resources and public goods. d. private goods and natural monopolies.

natural monopolies and public goods

If a road is congested, then use of that road by an additional person would lead to a a. negative externality. b. positive externality. c. Pigovian externality. d. free-rider problem with rush hour drivers stuck in traffic

negative externality

Most lighthouses are operated by the government because a. of the free-rider problem. b. lighthouses are no longer valued by society. c. most lighthouses are only tourist attractions in state and national parks. d. shipping companies would not be able to afford maintenance fees for lighthouses.

of the free-rider problem

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

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

The value and cost of goods are easiest to determine when the goods are a. private goods. b. public goods. c. common resources. d. natural monopolies.

private goods

The old lyric "the best things in life are free" a. is not true for any goods. b. is even true for some goods that have a price. c. refers to goods provided by nature or the government. d. refers to goods provided by the market.

refers to goods provided by nature or the government

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

the market will devote too few resources to the production of the good

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

the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse

The greatest difficulty with cost-benefit analysis of a public project is determining a. whether government revenue is sufficient to cover the cost of the project. b. which contractor should be awarded the project. c. the cost of the project. d. the value or benefit of the project.

the value or benefit of the project

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

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

Some goods can be either common resources or public goods depending on a. whether the good is rival in consumption. b. whether the good is excludable. c. the marginal cost of the good. d. None of the above is correct.

whether the good is rival in consumption