Question 1

If we can conclude that human life has a finite value, cost-benefit analysis can lead to solutions in which human life is worth less than the cost of a potential project.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a reason why government agencies subsidize basic research?

Accepted Answer

A)  The private market devotes too few resources to basic research.
B)  The general knowledge developed through basic research can be used without charge.
C)  The social benefit of additional knowledge is perceived to be greater than the cost of the subsidies.
D)  The government wants to attract the brightest researchers away from private research firms.E) A) and B)
F) None of the above

Question 3

Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the show.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of the Tragedy of the Commons?

Accepted Answer

A)  The number of professional soccer teams increases to the point where the quality of the games decreases, as does television viewership.
B)  A type of duck becomes extinct due to overhunting.
C)  An amusement park becomes so crowded that it institutes a lottery for admissions.
D)  A monkey breeding program becomes so successful that local zoos have to build additional exhibits so that visitors can view the primates.E) All of the above
F) A) and D)

Question 5

Recall the four types of goods. Are national defense and basic research the same type of good? Briefly explain.

Accepted Answer

Yes. Both national d...

Question 6

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

Accepted Answer

A)  overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good.
B)  overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good.
C)  understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good.
D)  understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good.E) None of the above
F) A) and B)

Question 7

One benefit of the patent system is that it encourages the production of technical knowledge.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a characteristic of a public good?

Accepted Answer

A)  It is not excludable.
B)  It is not diminished or depreciated as additional people consume the good.
C)  Its benefits cannot be withheld from anyone.
D)  Because it is a free good, there is no opportunity cost.E) None of the above
F) C) and D)

Question 9

Private goods and club goods have in common that they are excludable, but are different in that private goods are rival while club goods are not rival in consumption.

Accepted Answer

A) True 
 B)False

Question 10

Free goods are usually efficiently allocated without government intervention.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  allow individual shepherds to choose 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.E) All of the above
F) B) and C)

Question 12

Markets may fail to allocate resources efficiently when property rights are not well established.

Accepted Answer

A) True 
 B)False

Question 13

If one person's use of good x diminishes other people's use of it, then good x is one of two types of goods. What are those two types?

Accepted Answer

As described, good x is rival ...

Question 14

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 public good? Briefly explain.

Accepted Answer

The beautiful mural is the bes...

Question 15

Advocates of antipoverty programs claim that fighting poverty is a public good.

Accepted Answer

A) True 
 B)False

Question 16

Is national defense excludable? Is it rival in consumption? How do we classify national defense in terms of the four types of goods?

Accepted Answer

National defense is ...

Question 17

Which of the following goods is the best example of a public good?

Accepted Answer

A)  Garbage-collection services that are provided by a municipal government.
B)  Music that is broadcast over the airwaves by a privately-owned FM radio station.
C)  Electricity that is provided to farmhouses by a rural electric cooperative.
D)  Cable TV services that are provided by a privately-owned firm that is regulated by the government of the city in which it operates.E) None of the above
F) B) and D)

Question 18

The overuse of a common resource relative to its economically efficient use is called

Accepted Answer

A)  the free-rider problem.
B)  the Tragedy of the Commons.
C)  a public good.
D)  cost-benefit analysis.E) A) and B)
F) A) and C)

Question 19

Why is cable TV reception regarded as a club good?

Accepted Answer

Cable TV reception is excludable, becaus...

Question 20

Producers 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) All of the above
F) A) and C)

Exam 11: Public Goods and Common Resources

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 public good? Briefly explain.

Correct AnswerverifiedThe beautiful mural is the bes...View AnswerShow Answer

Why is cable TV reception regarded as a club good?

Correct AnswerverifiedCable TV reception is excludable, becaus...View AnswerShow Answer

The overuse of a common resource relative to its economically efficient use is called

Correct AnswerverifiedShow Answer

Which of the following goods is the best example of a public good?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a public good?

Correct AnswerverifiedShow Answer

Which of the following is an example of the Tragedy of the Commons?

Correct AnswerverifiedShow Answer

Is national defense excludable? Is it rival in consumption? How do we classify national defense in terms of the four types of goods?

Correct AnswerverifiedNational defense is ...View AnswerShow Answer

Free goods are usually efficiently allocated without government intervention.

Correct AnswerverifiedShow Answer

Advocates of antipoverty programs claim that fighting poverty is a public good.

Correct AnswerverifiedShow Answer

If one person's use of good x diminishes other people's use of it, then good x is one of two types of goods. What are those two types?

Correct AnswerverifiedAs described, good x is rival ...View AnswerShow Answer

Markets may fail to allocate resources efficiently when property rights are not well established.

Correct AnswerverifiedShow Answer

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

Correct AnswerverifiedShow Answer

One benefit of the patent system is that it encourages the production of technical knowledge.

Correct AnswerverifiedShow Answer

Which of the following is not a reason why government agencies subsidize basic research?

Correct AnswerverifiedShow Answer

Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the show.

Correct AnswerverifiedShow Answer

Producers have little incentive to produce a public good because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If we can conclude that human life has a finite value, cost-benefit analysis can lead to solutions in which human life is worth less than the cost of a potential project.

Correct AnswerverifiedShow Answer

Private goods and club goods have in common that they are excludable, but are different in that private goods are rival while club goods are not rival in consumption.

Correct AnswerverifiedShow Answer

Recall the four types of goods. Are national defense and basic research the same type of good? Briefly explain.

Correct AnswerverifiedYes. Both national d...View AnswerShow Answer

Correct Answer
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The beautiful mural is the bes...
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Cable TV reception is excludable, becaus...
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National defense is ...
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As described, good x is rival ...
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Yes. Both national d...
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