Chapter 11 Public Goods and Common Resources

Test B
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Two characteristics of any private good are a. excludable and nonrival. b. excludable and rival. c. nonexcludable and rival. d. nonexcludable and nonrival. ANSWER b. excludable and rival. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# ! NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON-LINE QUI STUDENTS MA" HA#E ALREAD" SEEN THIS QUESTION AND ITS ANSWER!
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What is -eant by the non.excludability characteristic of public goods/ a. The govern-ent produces a good whether or not anyone wants to purchase the good. b. The -arginal cost of producing another unit of a good is 0ero. c. (nly the rich can afford a good so the poor are excluded. d. The nature of a good allows individuals who do not pay for the good to consu-e it. ANSWER d. The nature of a good allows individuals who do not pay for the good to consu-e it. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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A good that is both nonrival and excludable would be a a. co--on resource good. b. natural -onopoly. c. public good. d. private good. ANSWER b. natural -onopoly. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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Which characteristic is associated with both public goods as well as co--on resources/ a. rival b. nonrival c. excludable d. nonexcludable ANSWER d. nonexcludable T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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Which of the following will N(T occur when a person uses a co--on resource/ a. 't causes an externality. b. (thers will be worse off. c. No one else will be able to use the co--on resource. d. The person will probably not be charged for using the co--on resource. ANSWER c. No one else will be able to use the co--on resource. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !

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1,7 &hapter 118"ublic 9oods and &o--on Resources

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Which of the following would N(T be considered a private good/ a. clothing b. pi00a c. "al- "ilot d. cable T+ ANSWER d. cable T+ T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# ! NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON-LINE QUI STUDENTS MA" HA#E ALREAD" SEEN THIS QUESTION AND ITS ANSWER!
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'f the provision of public goods were left to the private sector a. the outco-e would be -ore efficient6 because the govern-ent is notoriously inefficient. b. -ore of the public goods would be produced than society desires. c. the free.rider proble- would cause less than the efficient ;uantity to be produced. d. the govern-ent would be forced to raise taxes. ANSWER c. the free.rider proble- would cause less than the efficient ;uantity to be produced. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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A free rider is a a. person who will only purchase a product on sale. b. person who receives the benefit of a good but avoids paying for it. c. supplier who can produce a good at no cost. d. person who ta=es advantage of tax loop.holes to lower his taxes. ANSWER b. person who receives the benefit of a good but avoids paying for it. T!"E # $E!1 % SE&T'(N , ()*E&T'+E , RAN%(# !
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"ublic goods such as national defense are provided by the govern-ent because a. it is i-possible for private -ar=ets to produce public goods. b. products provided by the govern-ent can be produced -ore efficiently. c. free riders -a=e it difficult for private -ar=ets to supply the socially opti-al ;uantity. d. if the good were produced in private -ar=ets6 -ost li=ely too -uch of the product would be produced. ANSWER c. free riders -a=e it difficult for private -ar=ets to supply the socially opti-al ;uantity. T!"E # $E!1 % SE&T'(N , ()*E&T'+E , RAN%(# !
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'f the govern-ent decided to build a new highway6 the first step would be to conduct a study to deter-ine the value of the pro@ect. This study would be called a a. fiscal analysis. b. -onetary analysis. c. welfare analysis. d. costAbenefit analysis. ANSWER d. costAbenefit analysis. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !
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't is apparent that externalities are present in a -ar=et whenever a. a shortage exists. b. the price is higher than e;uilibriu- price. c. private costs differ fro- social costs. d. the seller is not -a=ing a profit. ANSWER c. private costs differ fro- social costs. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !

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&hapter 118"ublic 9oods and &o--on Resources 1,:

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Each of the following explain why costAbenefit analysis is such a difficult @ob EB&E"T a. there is no price with which to @udge the value of a public good. b. surveys are often biased and unreliable. c. it is difficult to identify all factors that influence the costs and benefits of public goods. d. govern-ent pro@ects rarely have sufficient funding to co-plete pro@ects on ti-e. ANSWER d. govern-ent pro@ects rarely have sufficient funding to co-plete pro@ects on ti-e. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !
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To increase safety at a bad intersection6 you -ust decide whether to install a traffic light in your ho-etown at a cost of C1?6???. 'f the traffic light reduces the ris= of fatality by ?.3 percent and the value of a hu-an life is about C1? -illion6 you should a. install the light because the expected benefit of C3?6??? is greater than the cost. b. install the light because the expected benefit of C,?6??? is greater than the cost. c. not install the light because the expected benefit of C1?6??? is only e;ual to the cost. d. not install the light because the expected benefit of C36??? is less than the cost. ANSWER a. install the light because the expected benefit of C3?6??? is greater than the cost. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !
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When trying to deter-ine if A-ericans would be willing to spend C1 billion to successfully restore sal-on in the Sna=e River6 the Ar-y &orps of Engineers would be deter-ining a. -oral value. b. existence value. c. restoration value. d. public value. ANSWER b. existence value. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# ! NOTE: THE FOLLOWING QUESTION IS REPEATED FROM THE ON-LINE QUI STUDENTS MA" HA#E ALREAD" SEEN THIS QUESTION AND ITS ANSWER!
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Suppose twenty ranchers @ointly own 3??? acres. Their cows gra0e on the land during spring and su--er. The land beco-es over.gra0ed. This is an exa-ple of a. the Tragedy of the &o--ons. b. an assign-ent of pollution rights. c. negligence. d. a positive externality. ANSWER a. the Tragedy of the &o--ons. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !
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The Tragedy of the &o--ons can be corrected by a. providing -ore of the resource for public use. b. assigning property rights to individuals. c. providing govern-ent subsidies for the resource. d. -a=ing certain everyone in the econo-y has access to the resource. ANSWER b. assigning property rights to individuals. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !
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'f the use of a co--on resource is not regulated6 a. it cannot be used by anyone. b. the econo-y will end up with too -uch of a good thing. c. it beco-es a private good. d. it will be overused. ANSWER d. it will be overused. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !

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1,< &hapter 118"ublic 9oods and &o--on Resources

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$nowledge is a good exa-ple of a a. public good. b. private good. c. co--on resource. d. natural -onopoly good. ANSWER a. public good. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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'n an atte-pt to re-edy the presence of a negative externality such as pollution in a -ar=et6 the govern-ent -ay choose to i-pose a a. "igovian tax. b. subsidy. c. co--and.and.control policy. d. &oase theore- solution. ANSWER a. "igovian tax. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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'f a road is congested6 then use of that road by an additional person would lead to a a. negative externality. b. positive externality. c. natural -onopoly proble-. d. free.rider proble- with rush hour drivers stuc= in traffic. ANSWER a. negative externality. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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The reason why elephants are endangered and cows are not is because a. cows are not as valuable as elephants. b. elephants are a co--on resource and cows are a private good. c. cows are a co--on resource and elephants are a private good. d. it is legal to =ill cows6 but not elephants. ANSWER b. elephants are a co--on resource and cows are a private good. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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't is co--on =nowledge that -any D.S. national par=s have beco-e overused. (ne possible solution to this proble- is to a. increase entrance fees. b. conduct a study to deter-ine the carrying capacity of the individual par=s. c. reduce the national par= service budget. d. All of the above are possible solutions. ANSWER a. increase entrance fees. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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National par=s have beco-e Eoverrun and overtra-pledF pri-arily because a. par= ad-inistrators have not historically been the best -anagers of par= resources. b. national par=s are treated as free goods by their visitors. c. fees charged at national par=s are used by the govern-ent to provide other public goods and not for par= up=eep. d. the entrance fee to national par=s today is co-parable to the fee charged at %isney World. ANSWER b. national par=s are treated as free goods by their visitors. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !

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&hapter 118"ublic 9oods and &o--on Resources 1,>

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(ne proble- that occurs when the govern-ent places a tax on gasoline is that it a. does nothing to reduce traffic on the highways. b. does not affect driving behavior at all. c. does nothing to internali0e the congestion externality proble-. d. discourages driving on congested roads6 but also on noncongested roads that have no congestion externality. ANSWER d. discourages driving on congested roads6 but also on noncongested roads that have no congestion externality. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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'n all cases6 the -ar=et fails to allocate resources efficiently because a. the govern-ent refuses to intervene in private -ar=ets. b. property rights are not well established. c. individuals in private -ar=ets beco-e too greedy. d. only the govern-ent can allocate resources efficiently. ANSWER b. property rights are not well established. T!"E # $E!1 % SE&T'(N 2 ()*E&T'+E 7 RAN%(# !

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ANSWER b. excludable and rival. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !

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ANSWER d. The nature of a good allows individuals who do not pay for the good to consu-e it. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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ANSWER b. natural -onopoly. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !

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ANSWER d. nonexcludable T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !

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ANSWER c. No one else will be able to use the co--on resource. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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ANSWER d. cable T+ T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !

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ANSWER c. the free.rider proble- would cause less than the efficient ;uantity to be produced. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 1 RAN%(# !
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ANSWER b. person who receives the benefit of a good but avoids paying for it. T!"E # $E!1 % SE&T'(N , ()*E&T'+E , RAN%(# !
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ANSWER c. free riders -a=e it difficult for private -ar=ets to supply the socially opti-al ;uantity. T!"E # $E!1 % SE&T'(N , ()*E&T'+E , RAN%(# !
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ANSWER d. costAbenefit analysis. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !

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ANSWER c. private costs differ fro- social costs. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !
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ANSWER d. govern-ent pro@ects rarely have sufficient funding to co-plete pro@ects on ti-e. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !
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ANSWER a. install the light because the expected benefit of C3?6??? is greater than the cost. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !
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ANSWER b. existence value. T!"E # $E!1 % SE&T'(N , ()*E&T'+E 2 RAN%(# !

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ANSWER a.

the Tragedy of the &o--ons.

T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !

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ANSWER b. assigning property rights to individuals. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !
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ANSWER d. it will be overused. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 3 RAN%(# !

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ANSWER a. public good. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !

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ANSWER a."igovian tax. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !

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ANSWER a. negative externality. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !

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ANSWER b. elephants are a co--on resource and cows are a private good. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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ANSWER a. increase entrance fees. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !

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ANSWER b. national par=s are treated as free goods by their visitors. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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ANSWER d. discourages driving on congested roads6 but also on noncongested roads that have no congestion externality. T!"E # $E!1 % SE&T'(N 1 ()*E&T'+E 7 RAN%(# !
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ANSWER b. property rights are not well established. T!"E # $E!1 % SE&T'(N 2 ()*E&T'+E 7 RAN%(# !