Question 1

A cable television broadcast of a movie is

Accepted Answer

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.E) None of the above
F) A) and D)

Question 2

Most lighthouses are operated by the government because

Accepted Answer

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.E) C) and D)
F) A) and B)

Question 3

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

Accepted Answer

A)   rival in consumption and is excludable.
B)   not rival in consumption,but is excludable.
C)   rival in consumption,but is not excludable.
D)   not rival in consumption nor is it excludable.E) A) and D)
F) A) and B)

Question 4

Although national defense is currently a public good,economists who advocate small government generally agree that the U.S.should privatize national defense to increase the efficiency of the good.

Accepted Answer

A) True 
 B)False

Question 5

An FM radio signal is an example of a good that is

Accepted Answer

A)   private.
B)   nonrival in consumption.
C)   social.
D)   nonexcludable in production.E) None of the above
F) All of the above

Question 6

Goods that are not excludable include both

Accepted Answer

A)   private goods and public goods.
B)   natural monopolies and common resources.
C)   common resources and public goods.
D)   private goods and natural monopolies.E) B) and C)
F) All of the above

Question 7

The creation of knowledge is a public good.Because knowledge is a public good,profit-seeking firms tend to free-ride on the knowledge created by others and,as a result,devote too few resources to the creation of knowledge.How does the U.S.government correct for this apparent market failure?

Accepted Answer

The government assigns and protects the ...

Question 8

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?

Accepted Answer

A)   to prevent overuse
B)   to decrease taxes
C)   to fight poverty
D)   to increase consumptionE) All of the above
F) B) and C)

Question 9

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.An economist would suggest that

Accepted Answer

A)   every electric customer has an incentive to prevent the system from overloading,so this voluntary approach is the most efficient.
B)   it would be more efficient if the electric company raised its rates for electricity at peak times.
C)   it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times.
D)   it would be more efficient to force everyone to cut their usage of electricity by the same amount.E) None of the above
F) B) and C)

Question 10

As with many public goods,determining the appropriate level of government support for the production of general knowledge is difficult because

Accepted Answer

A)   patents correct for an unknown portion of the externality.
B)   benefits are hard to measure.
C)   members of Congress are often experts in the sciences.
D)   the costs always exceed the benefits.E) A) and B)
F) None of the above

Question 11

People have little incentive to produce a public good because

Accepted Answer

A)   the social benefit is less than the private benefit.
B)   the social benefit is less than the social cost.
C)   there is a free-rider problem.
D)   there is a Tragedy of the Commons.E) A) and B)
F) None of the above

Question 12

When a free-rider problem exists,

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 13

Some goods,such as lighthouses,can switch between being public goods and being private goods depending on the circumstances.

Accepted Answer

A) True 
 B)False

Question 14

An example of the "Tragedy of the Commons" is litter in the picnic area of a local park.

Accepted Answer

A) True 
 B)False

Question 15

Labor is a

Accepted Answer

A)   private good.
B)   natural monopoly.
C)   common resource.
D)   public good.E) B) and C)
F) A) and D)

Question 16

Each of the following would be considered a common resource except

Accepted Answer

A)   clean air.
B)   congested nontoll roads.
C)   national defense.
D)   open grazing land.E) None of the above
F) B) and D)

Question 17

The Tragedy of the Commons results when a good is

Accepted Answer

A)   rival in consumption and not excludable.
B)   excludable and not rival in consumption.
C)   both rival in consumption and excludable.
D)   neither rival in consumption nor excludable.E) A) and D)
F) All of the above

Question 18

The local fire department wants to buy some new equipment at a cost of $1 million.If a 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

Accepted Answer

A)   1 percentage point.
B)   5 percentage points.
C)   7 percentage points.
D)   10 percentage points.E) B) and C)
F) C) and D)

Question 19

What causes the Tragedy of the Commons?

Accepted Answer

A)   (i) only
B)   (ii) only
C)   (i) and (ii) only
D)   (i) and (iii) onlyE) B) and C)
F) A) and D)

Question 20

Both private goods and natural monopolies are

Accepted Answer

A)   rival in consumption.
B)   nonrival in consumption.
C)   excludable.
D)   nonexcludable.E) None of the above
F) B) and D)

Exam 11: Public Goods and Common Resources

An example of the "Tragedy of the Commons" is litter in the picnic area of a local park.

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What causes the Tragedy of the Commons?

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The Tragedy of the Commons results when a good is

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Each of the following would be considered a common resource except

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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

Correct AnswerverifiedShow Answer

As with many public goods,determining the appropriate level of government support for the production of general knowledge is difficult because

Correct AnswerverifiedShow Answer

A cable television broadcast of a movie is

Correct AnswerverifiedShow Answer

The creation of knowledge is a public good.Because knowledge is a public good,profit-seeking firms tend to free-ride on the knowledge created by others and,as a result,devote too few resources to the creation of knowledge.How does the U.S.government correct for this apparent market failure?

Correct AnswerverifiedThe government assigns and protects the ...View AnswerShow Answer

The local fire department wants to buy some new equipment at a cost of $1 million.If a 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

Correct AnswerverifiedShow Answer

Goods that are not excludable include both

Correct AnswerverifiedShow Answer

When a free-rider problem exists,

Correct AnswerverifiedShow Answer

Labor is a

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

An FM radio signal is an example of a good that is

Correct AnswerverifiedShow Answer

Although national defense is currently a public good,economists who advocate small government generally agree that the U.S.should privatize national defense to increase the efficiency of the good.

Correct AnswerverifiedShow Answer

People have little incentive to produce a public good because

Correct AnswerverifiedShow Answer

Some goods,such as lighthouses,can switch between being public goods and being private goods depending on the circumstances.

Correct AnswerverifiedShow Answer

Most lighthouses are operated by the government because

Correct AnswerverifiedShow Answer

Both private goods and natural monopolies are

Correct AnswerverifiedShow Answer

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.An economist would suggest that

Correct AnswerverifiedShow Answer

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The government assigns and protects the ...
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