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Exam 11: Public Goods and Common Resources

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Question 51

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Depending on congestion, national parks can be either a common resource or a public good.

A) True
B) False

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Question 52

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A lighthouse is typically considered to be a public good because

A) the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse.
B) there is rarely another lighthouse nearby to provide competition.
C) a nearby port authority cannot avoid paying fees to the lighthouse owner.
D) all passing ships are able to enjoy the benefits of the lighthouse without paying.

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

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Question 53

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A regional elephant management board recently proposed a five-year moratorium on elephant hunting in Botswana based on a study of the elephant population. Which of the following statements is not correct?

When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.

In some cases the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide.

Scenario 11-2 Consider the following goods: • fire-protection services provided by a fire department • a beautiful mural on the outside wall of a fire station • a firefighter's helmet -Refer to Scenario 11-2. Which of these goods is the best example of a club good? Briefly explain.

Table 11-1 Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. ​ ​ -Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build?

Pollution is a

Is a congested nontoll road excludable? Is it rival in consumption? How do we classify a congested nontoll road in terms of the four types of goods?

What is the main difficulty facing cost-benefit analysts when they attempt to evaluate the worthiness of proposed public projects?

Table 11-2 Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident's willingness to pay for each hour of cleaning. ​ $\begin{array} { l l l l l } \hline \text { Hours } & \text { John } & \text { James } & \text { Mary } & \text { Lydia } \\\hline 1 & \$ 30 & \$ 50 & \$ 40 & \$ 10 \\2 & 25 & 40 & 37 & 9 \\3 & 20 & 30 & 34 & 8 \\4 & 15 & 20 & 30 & 7 \\5 & 9 & 10 & 25 & 6 \\6 & 3 & 0 & 15 & 5 \\7 & 0 & 0 & 5 & 4 \\\hline\end{array}$ ​ -Refer to Table 11-2. Suppose the cost to clean the lake is $12 per hour and that the residents have agreed to split the cost of cleaning the lake equally. The number of cleaning hours that maximizes total surplus of Widgetapolis is 7 hours.

One solution to the "Tragedy of the Commons" is to turn the common resource into a private good.

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

Recall the four types of goods. Are national defense and a patented invention the same type of good? Briefly explain.

Table 11-3 -For all types of goods that are not private goods, the market fails to allocate resources efficiently because _________________.

People cannot be prevented from using a good if the good is a

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 free-rider is someone who receives the benefit of a good but avoids paying for it.

A cost-benefit analysis of a highway is difficult to conduct because analysts

One way to place a value on human life is to examine the risks that people voluntarily take and how much they must be paid for taking them. What is the approximate value of a human life according to studies that use this approach?