ECON Quiz 7
Highway engineers want to improve a dangerous stretch of highway. They expect that it will reduce the risk of someone dying in an accident from 4.1% to 1.5% over the life of the highway. If a human life is worth $4.2 million, then the project is worth doing as long as it does not cost more than
$109,200
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
$50,000
The local fire department wants to buy some new equipment at a cost of $300,000. If a new human life is worth $10 million, the equipment is worth buying if it reduces the risk of someone dying in a fire over the life of the equipment by at least
3 percentage points.
An overcrowded beach is an example of
A Tragedy of the Commons.
Which of the following goods is rival in consumption and excludable?
A can of Coca-Cola
Four roommates share an off-campus house and equally share the cost of rent. Everyone says that she values a clean house, yet the house is usually dirty. To an economist, a clean house in this case represents
A common resource problem
A city street
A common resource when it is congested, but it is a public good when it is not congested
Which of the following is NOT a common resource?
A fireworks display
Mitch hunts deer. His shotgun is
A private good and the deer he hunts are common resources
Which of the following would NOT be considered a private good?
Cable TV service
The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?
Common resources
Before considering any public project, the government should
Compare the total cost and total benefits of the project, and conduct a cost-benefit analysis.
Suppose that a small county is considering adding a guard rail to a dangerous curve by a river. The guard rail will cost $70,000. The average damage done to vehicles that slide off the road at the curve is $10,000. It is expected that the guard rail will prevent 5 vehicles from sliding off the road during its usable life. What should the county do?
Do not install the guard rail because the costs exceed the benefits.
Imagine a 2,000-acre park with picnic benches, trees and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking, and the trash cans overflow with food wrappers on summer afternoons. Otherwise, it is a great place. The park is a common resource because
If too many people use its one person's use diminishes other people's use
If the use of a common resource is not regulated,
It will be overused
An FM radio signal is an example of a good that is
Non-rival in consumption
Reggie owns 3 acres of beautiful wooded land. When Reggie decides to move to be closer to his grandchildren, he donates the land to the state with the understanding that the land will be used as a state park. This state park is large enough that it is not congested. It is an example of a good that is
Non-rival in consumption and excludable
Antonio, Vanessa, and Norah all enjoy looking at flowers blooming in gardens in their neighborhood. The neighborhood association is considering planting a flower garden around the sign at the entrance to the neighborhood. Antonio values the garden at $25, Vanessa at $15, and Norah at $30. The flowers and labor for the garden cost $55. What should the neighborhood association do?
Plant the garden
The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case?
Private good
A textbook is a
Private good and knowledge that one gains from reading the book is a public good
If one person's use of a good diminishes another person's enjoyment of it, the good is
Rival in consumption
Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource EXCEPT
Asking individuals to voluntarily reduce their use of the resource
At the local park there is a playground that anyone may use. There is rarely anyone using the playground, so children who use the playground receive full enjoyment from its use. The playground is
Not rival in consumption nor is it excludable
Which of the following statements is NOT correct?
The Tragedy of the Commons illustrates the underuse of a common resource.
When a free-rider problem exists,
The good will not be produced
You are the mayor of a town with 20,000 residents. The head of your economic development agency recently conducted a survey in which the 20,000 residents said that a small public library in the center of town would be worth $40 to each of them. The cost to build the library is $500,000. Which is the most efficient option?
The library should be built and paid for by the town government and paid for with a tax on the residents because all residents would benefit from it but some residents would not donate if they were asked.
The privately-owned school system in Small-town has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Since the benefit that each citizen receives from having an educated community is a public good, which of the following would NOT be correct?
The private market is best way to supply education
The goal of requiring licenses for hunting and fishing is
To reduce the use of a common resource
Which parable describes the problem of wild animals that are hunted to the point of extinction?
Tragedy of the Commons
Which of the following is NOT a typical solution to the "Tragedy of the Commons"?
Turning the common resource into a club good
Under which of the following scenarios would a park be considered a common resource?
Visitors can enter the park free of charge, but frequently all of the picnic tables are in use.
Under which of the following scenarios would a park be considered a club good?
Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables.