Question 1

The mayor of Newton is considering proposals to deal with an unsafe intersection. She could install a traffic light at a cost of $50,000 or she could install stop signs at a cost of $5,000. The traffic light is expected to reduce the risk of fatality by 0.45 percent and the stop signs are expected to reduce the risk of fatality by 0.054 percent. If the value of human life is estimated to be $10 million, what choice should the mayor make? Briefly explain.

Accepted Answer

The mayor should install stop ...

Question 2

Even economists who advocate small government agree that national defense is a good that the government should provide.

Accepted Answer

A) True 
 B)False

Question 3

When a good does not have a attached to it, private markets fail to ensure that the good is produced and consumed in the proper amounts.

Accepted Answer

The answer of When a good does not have a...

Question 4

What do we mean when we say that a good is excludable?

Accepted Answer

A good is excludable...

Question 5

Table 11-2
Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight.
 
-Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus) , what is the greatest number of streetlights for which the majority of families would vote "yes?"

Accepted Answer

A)   1 streetlight
B)   2 streetlights
C)   3 streetlights
D)   4 streetlightsE) B) and D)
F) A) and C)

Question 6

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 operatesE) A) and C)
F) None of the above

Question 7

Figure 11-1
 
-Refer to Figure 11-1. The box labeled B represents

Accepted Answer

A)   private goods.
B)   club goods.
C)   common resources.
D)   public goods.E) C) and D)
F) B) and D)

Question 8

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) All of the above
F) A) and B)

Question 9

A neighborhood voted to develop a vacant lot into a vegetable garden. All of the neighbors worked the land and sowed the seeds. A few neighbors picked and ate the produce before the other neighbors had a chance. Which of the following could solve this example of the Tragedy of the Commons?

Accepted Answer

A)   The neighborhood divides the lot into equal size plots and each family can plant and harvest only on their plot.
B)   The neighborhood continues to work the land and sow the seeds as a group, but sells all of the produce to willing buyers and reinvests the proceeds into the garden for the next year.
C)   The neighborhood decides to stop gardening on this land because there is no equitable way to allocate the produce.
D)   Both a and b are possible solutions to this example of the Tragedy of the CommonsE) A) and B)
F) B) and D)

Question 10

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) B) and D)
F) None of the above

Question 11

Goods that are rival in consumption and excludable would be considered

Accepted Answer

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

Question 12

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

Question 13

Most goods in the economy are

Accepted Answer

A)   club goods.
B)   common resources.
C)   public goods.
D)   private goods.E) None of the above
F) A) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)   The establishment of property rights sometimes gives rise to market failure.
B)   The absence of property rights sometimes gives rise to market failure.
C)   In the context of public goods, the Coase theorem implies that total surplus in some markets can be improved by the elimination of property rights.
D)   Government regulation of private behavior, in response to market failure, can never improve social well-being.E) C) and D)
F) A) and B)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If the use of a common resource is not regulated,

Accepted Answer

A)   no one can enjoy it.
B)   it will tend to be underused.
C)   property rights will be clearly defined.
D)   it will be overused.E) A) and C)
F) None of the above

Question 17

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 18

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

Question 19

The parable called the Tragedy of the Commons applies to goods such as

Accepted Answer

A)   fire protection and cable TV.
B)   tornado sirens and basic research.
C)   clean air and clean water.
D)   antipoverty programs and national defense.E) All of the above
F) A) and C)

Question 20

Suppose that installing an overhead pedestrian walkway would cost a college town $150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million. The town should

Accepted Answer

A)   install the walkway because the estimated benefit is twice the cost.
B)   install the walkway because the estimated benefit equals the cost.
C)   not install the walkway, since the cost is twice the estimated benefit.
D)   install the walkway, since the cost of even a single life is too great not to take action.E) A) and B)
F) B) and C)

Exam 11: Public Goods and Common Resources

If the use of a common resource is not regulated,

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

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

The parable called the Tragedy of the Commons applies to goods such as

Correct Answer
verified

When a good does not have a attached to it, private markets fail to ensure that the good is produced and consumed in the proper amounts.

Correct Answer
verified

What do we mean when we say that a good is excludable?

Correct Answer
verified
A good is excludable...
View Answer

Correct Answer
verified
The mayor should install stop ...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

Even economists who advocate small government agree that national defense is a good that the government should provide.

Correct Answer
verified

Correct Answer
verified

Most goods in the economy are

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

When a free-rider problem exists,

Correct Answer
verified

A neighborhood voted to develop a vacant lot into a vegetable garden. All of the neighbors worked the land and sowed the seeds. A few neighbors picked and ate the produce before the other neighbors had a chance. Which of the following could solve this example of the Tragedy of the Commons?

Correct Answer
verified

Suppose that installing an overhead pedestrian walkway would cost a college town $150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million. The town should

Correct Answer
verified

Figure 11-1 -Refer to Figure 11-1. The box labeled B represents

Correct Answer
verified

Producers have little incentive to produce a public good because

Correct Answer
verified

Goods that are rival in consumption and excludable would be considered

Correct Answer
verified

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

Correct Answer
verified

Exam 11: Public Goods and Common Resources

If the use of a common resource is not regulated,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The parable called the Tragedy of the Commons applies to goods such as

Correct AnswerverifiedShow Answer

When a good does not have a attached to it, private markets fail to ensure that the good is produced and consumed in the proper amounts.

Correct AnswerverifiedShow Answer

What do we mean when we say that a good is excludable?

Correct AnswerverifiedA good is excludable...View AnswerShow Answer

Correct AnswerverifiedThe mayor should install stop ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Even economists who advocate small government agree that national defense is a good that the government should provide.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Most goods in the economy are

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

When a free-rider problem exists,

Correct AnswerverifiedShow Answer

A neighborhood voted to develop a vacant lot into a vegetable garden. All of the neighbors worked the land and sowed the seeds. A few neighbors picked and ate the produce before the other neighbors had a chance. Which of the following could solve this example of the Tragedy of the Commons?

Correct AnswerverifiedShow Answer

Suppose that installing an overhead pedestrian walkway would cost a college town $150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million. The town should

Correct AnswerverifiedShow Answer

Figure 11-1 -Refer to Figure 11-1. The box labeled B represents

Correct AnswerverifiedShow Answer

Producers have little incentive to produce a public good because

Correct AnswerverifiedShow Answer

Goods that are rival in consumption and excludable would be considered

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

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Correct Answer
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A good is excludable...
View Answer

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The mayor should install stop ...
View Answer

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