Question 1

Private companies will invest in medical research if

Accepted Answer

A)   they will produce general knowledge.
B)   they will produce a specific product for which they may receive a patent.
C)   there is no government intervention in the market for medical products.
D)   others will benefit from their discoveries.E) None of the above
F) A) and D)

Question 2

Nine friends who love the beach decide to pool their financial resources and equally share the cost of a one-week house rental on Nantucket. Suppose that the beach outside of the house becomes more congested when the nine additional people join the other beachgoers. Which of the following statements is not correct?

Accepted Answer

A)   Use of the beach by the nine new beachgoers will yield a negative externality.
B)   The town can reduce the congestion externality by raising the fee to access the beach.
C)   An increase in the fee to access the beach could be viewed as a corrective tax on the externality of congestion.
D)   Each of the nine friends would have been better off staying at home.E) B) and D)
F) All of the above

Question 3

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

Accepted Answer

A)   a common resource problem.
B)   a public good.
C)   a natural monopoly.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 4

People can be prevented from using a good if the good is

Accepted Answer

A)   a private good or a club good.
B)   a private good or a common resource.
C)   a public good or a common resource.
D)   a private good or a public good.E) None of the above
F) All of the above

Question 5

A town engineer comes to the city council with a proposal to install a traffic light at a certain intersection that currently has a stop sign. The benefit of the traffic light is increased safety because the light will reduce the incidence of fatal traffic accidents by 50 percent per year. Which of the following statements is correct?

Accepted Answer

A)   The city council should vote to install the traffic light because the benefits will outweigh the costs.
B)   The city council should carefully evaluate the benefits of reduced fatalities against only the explicit costs of the light.
C)   The city council should carefully evaluate the benefits of reduced fatalities against the costs of the light and of the extra time that drivers will spend waiting for a green light.
D)   The costs will invariably outweigh the benefits.E) A) and B)
F) B) and C)

Question 6

Figure 11-1
-Refer to Figure 11-1. With which of the boxes - A, B, C, or D - do we associate the Tragedy of the Commons?

Accepted Answer

We associate the Tra...

Question 7

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

Accepted Answer

A) True 
 B)False

Question 8

National defense is a classic example of a public good because

Accepted Answer

A)   there is no market for private security services.
B)   it is difficult to exclude people from receiving the benefits from national defense once it is provided.
C)   everyone agrees that some level of national defense is important, but only the government knows the optimal amount.
D)   there are no private firms willing to supply defense goods such as tanks and weapons.E) A) and D)
F) A) and C)

Question 9

Which of the following quotations illustrates the Tragedy of the Commons?

Accepted Answer

A)   "A bird in the hand is worth two in the bush."
B)   "The only difference between the rich and other people is that the rich have more money."
C)   "What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others."
D)   "Anyone who is not a socialist before he is 30 has no heart; anyone who is still a socialist after he is 30 has no head."E) C) and D)
F) A) and D)

Question 10

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) B) and D)
F) B) and C)

Question 11

Advocates of antipoverty programs claim that

Accepted Answer

A)   the government has good information about what people are willing to pay to eliminate poverty.
B)   fighting poverty is a public good.
C)   private sector will incur higher costs than the public sector for these programs.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 12

A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.

Accepted Answer

A) True 
 B)False

Question 13

A toll on a congested road is in essence

Accepted Answer

A)   an interstate highway tax.
B)   a Department of Motor Vehicles tax.
C)   a gasoline tax.
D)   a corrective tax.E) B) and C)
F) All of the above

Question 14

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that

Accepted Answer

A)   over time, the aquifer is likely to be overused.
B)   each farmer has a sufficient incentive to conserve the water.
C)   state governments have an incentive to insure that their farmers do not overuse the water.
D)   resources would be used more efficiently if the government paid for the pumps farmers use to get the water.E) A) and C)
F) B) and C)

Question 15

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

Question 16

Market failure associated with the free-rider problem is a result of

Accepted Answer

A)   a problem associated with pollution.
B)   benefits that accrue to those who don't pay.
C)   losses that accrue to providers of the product.
D)   market power.E) None of the above
F) A) and D)

Question 17

It would always be a mistake to view

Accepted Answer

A)   a streetlight as a common resource.
B)   a nontoll road as a public good.
C)   the environment as a common resource.
D)   a lighthouse as a public good.E) All of the above
F) B) and C)

Question 18

Simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because

Accepted Answer

A)   those who stand to gain have an incentive to tell the truth.
B)   those who stand to lose have an incentive to exaggerate their true costs.
C)   answers to the survey questions will always be downwardly biased.
D)   not everyone asked will be using the highway.E) B) and D)
F) B) and C)

Question 19

Private markets usually fail to provide lighthouses because

Accepted Answer

A)   lighthouses cost too much to build relative to their benefits.
B)   government intervention makes it hard for private lighthouse owners to compete in the market.
C)   ship captains have incentives to use lighthouses without paying.
D)   lighthouses are valued very little by ship captains these days.E) A) and B)
F) All of the above

Question 20

Free goods are usually efficiently allocated without government intervention.

Accepted Answer

A) True 
 B)False

Exam 11: Public Goods and Common Resources

Free goods are usually efficiently allocated without government intervention.

Correct Answer
verified

Which of the following quotations illustrates the Tragedy of the Commons?

Correct Answer
verified

Simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because

Correct Answer
verified

Advocates of antipoverty programs claim that

Correct Answer
verified

People can be prevented from using a good if the good is

Correct Answer
verified

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 Answer
verified

Correct Answer
verified

A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.

Correct Answer
verified

It would always be a mistake to view

Correct Answer
verified

National defense is a classic example of a public good because

Correct Answer
verified

A toll on a congested road is in essence

Correct Answer
verified

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

Correct Answer
verified

Private companies will invest in medical research if

Correct Answer
verified

Market failure associated with the free-rider problem is a result of

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that

Correct Answer
verified

Figure 11-1 -Refer to Figure 11-1. With which of the boxes - A, B, C, or D - do we associate the Tragedy of the Commons?

Correct Answer
verified
We associate the Tra...
View Answer

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

Correct Answer
verified

Private markets usually fail to provide lighthouses because

Correct Answer
verified

Exam 11: Public Goods and Common Resources

Free goods are usually efficiently allocated without government intervention.

Correct AnswerverifiedShow Answer

Which of the following quotations illustrates the Tragedy of the Commons?

Correct AnswerverifiedShow Answer

Simply asking people how much they value a highway is not a reliable way of measuring the benefits and costs because

Correct AnswerverifiedShow Answer

Advocates of antipoverty programs claim that

Correct AnswerverifiedShow Answer

People can be prevented from using a good if the good is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.

Correct AnswerverifiedShow Answer

It would always be a mistake to view

Correct AnswerverifiedShow Answer

National defense is a classic example of a public good because

Correct AnswerverifiedShow Answer

A toll on a congested road is in essence

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

Private companies will invest in medical research if

Correct AnswerverifiedShow Answer

Market failure associated with the free-rider problem is a result of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that

Correct AnswerverifiedShow Answer

Figure 11-1 -Refer to Figure 11-1. With which of the boxes - A, B, C, or D - do we associate the Tragedy of the Commons?

Correct AnswerverifiedWe associate the Tra...View AnswerShow Answer

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

Correct AnswerverifiedShow Answer

Private markets usually fail to provide lighthouses because

Correct AnswerverifiedShow Answer

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We associate the Tra...
View Answer

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Correct Answer
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