Deck 14: Common Property and Public Goods

Question 1

Crowding at a common property site both reduces the benefits of visitors and increases the costs
of being a visitor.

Answer 1

False

Question 2

When people have identical tastes,an increase in the demand for a common property's use will increase the social gain it creates.

Answer 2

False

Question 3

If the Open Range Field is currently a common property and the government decides to charge an entrance fee,this would result in an optimal level of activity in the Open Range Field.

Answer 3

False

Question 4

The producer of a public good creates a positive externality,so that such goods tend to be overproduced.

Question 5

When people have identical tastes,social gain can be created from a common property by imposing a Pigovian tax on entrants.

Question 6

Each user of a common property imposes a negative externality on its other users.

Question 7

Whether or not people have identical tastes,free entry to a common property leads to a suboptimal outcome.

Question 8

An HBO broadcast over cable television is rival in consumption but non-excludable.

Question 9

When people have identical tastes,nobody has any incentive to maintain or improve a property that is commonly owned.

Question 10

Whether or not people have identical tastes,a commonly owned property creates no social value.

Question 11

Whether or not people have identical tastes,the marginal entrant is indifferent about using a common property.

Question 12

People use a common property up to the point where the marginal cost of using it equals the social marginal benefit received from it.

Question 13

Use of a common property is nonrivalrous.

Question 14

A nonexcludable good,once produced,can be made available to others at no additional cost.

Question 15

Once it has been produced,the efficient price for a nonrivalrous good is zero.

Question 16

The problem with splitting checks is that no one orders as much as they truly want to eat in order to keep the total bill low.

Question 17

When people have identical tastes,the rents created by a common property are totally dissipated.

Question 18

A market failure occurs when the government steps in and failingly attempts to alleviate the tragedy of the commons.

Question 19

The tragedy of the commons is a situation where too much of an input is used by individuals,collectively making each individual worse off.

Question 20

Private markets tend to undersupply nonrivalrous goods because of free riding.

Question 21

Common Property II

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.




-Refer to Common Property II.If access cannot be prohibited,then users of the common property receive a surplus of

A) zero.
B) area I.
C) area F + G + H + I.
D) area A + C + F + I.

Question 22

An economic rent can be created by a common property without any admission fee

A) only if people have identical tastes.
B) if people's tastes differ,but the rent will still be sub-optimal.
C) if people's tastes differ,in which case the rent will be optimal.
D) if people's tastes differ,in which case the rent will be more than optimal.

Question 23

Public goods can frequently be provided by private action when the resulting benefits are widespread.

Question 24

Whether or not people have identical tastes,the net value that the marginal user receives from a common property is

A) positive.
B) zero.
C) negative.
D) uncertain.

Question 25

People will continue to use a common property until the marginal cost of using it equals

A) zero.
B) the social marginal benefit from using it.
C) the admission fee that a competitive firm would charge for its use.
D) the value they receive,on average,from using it.

Question 26

Common Property I

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.



-Refer to Common Property I.Suppose the common property becomes privately owned.The owner behaves competitively and charges people an entrance fee for the right to use the property.In this situation,how are the gains from trade divided between the owner and the users of the property?

A) The owner receives area C + D,and the users receive area A + B.
B) The owner receives area C,and the users receive area D.
C) The owner receives area E,and the users receive area A + B + C + D.
D) The owner receives area C + D,and the users receive zero.

Question 27

One problem with a Clarke tax is that although it may not cover the complete cost of a public good,it will never generate more than the cost of the good.

Question 28

If people have identical tastes,then the economic rent created by a common property is

A) zero.
B) as large as possible.
C) positive,but not as large as possible.
D) negative.

Question 29

In a Clarke tax scheme,the amount of tax that a person pays depends,in part,on his revealed preference for the public good.

Question 30

The term "tragedy of the commons" is used to describe

A) overpricing of computer software by Microsoft.
B) an increase in rents when air quality in a community improves.
C) the difficulty in obtaining honest evaluations of public goods.
D) the elimination of social gains due to the overuse of property without a well-defined owner.

Question 31

All economists agree that a public good is one the is nonrivalrous and nonexcludable.

Question 32

Common Property I

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.



-Refer to Common Property I.If access to the common property cannot be prohibited,then the resulting social gain equals

A) zero.
B) area E.
C) area A + B.
D) area C + D.

Question 33

Common Property I

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.



-Refer to Common Property I.The efficient level of production and consumption on the common property is

A) zero.
B) Q1.
C) Q2
D) cannot be determined from the graph.

Question 34

A common property is

A) both nonrivalrous and nonexcludable.
B) nonrivalrous,but not nonexcludable.
C) nonexcludable,but not nonrivalrous.
D) either nonrivalrous or nonexcludable,but not both.

Question 35

If the value that people,on average,receive from a common property exceeds the marginal cost of its use,then

A) more people will use the common property.
B) social gain is as large as possible.
C) the common property creates zero economic rent.
D) demand for the common property will fall.

Question 36

Which of the following is the best example of a common property?

A) The car of a student who is frequently willing to give her friends rides around town.
B) The air that you breathe.
C) Bread that you bake and share.
D) Disney World

Question 37

When a public goods increases the desirability of living in a certain area,benefits tend to be captured entirely by an increase in land values.

Question 38

A non-congested toll road is an example of a good that is excludable,but not rivalrous in consumption.

Question 39

Common Property I

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.



-Refer to Common Property I.Suppose the common property becomes privately owned.The owner behaves competitively and charges people an entrance fee for the right to use the property.The fee will be

A) P₁.
B) P₂.
C) P₂ - P₁.
D) zero.

Question 40

When a Clarke tax is used,the revenue collected may or may not cover the cost of providing the public good.

Question 41

Common Property II

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.




-Refer to Common Property II.Suppose the common property becomes privately owned.If the owner behaves competitively,what entrance fee would he charge for the right to use the property?

A) P_C.
B) P_C - P₁.
C) P₂ - P_C.
D) P₂ - P₁.

Question 42

Computer software is an example of a good that is

A) both nonexcludable and nonrivalrous.
B) nonexcludable,but not nonrivalrous.
C) nonrivalrous,but not nonexcludable.
D) a pure private good.

Question 43

Frequently,a public good can be adequately provided by private action when its benefits are

A) concentrated among a small number of people.
B) equally valued by everyone.
C) widespread.
D) greater than its costs.

Question 44

Which of the following goods is an example of a good that is nonexcludable but not nonrivalrous?

A) National defense.
B) A fishing lake.
C) A lighthouse.
D) A radio broadcast.

Question 45

The nature preservation services supplied by The Nature Conservancy which buys up ecologically important but endangered lands,is

A) nonrivalrous and nonexcludable.
B) nonrivalrous and excludable.
C) rival and nonexcludable.
D) a private service.

Question 46

Common Property II

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.




-Refer to Common Property II.If the common property is privately owned,the surplus to the consumers is

A) Area I
B) Area I + F + G
C) Area I + F + G + H
D) zero.

Question 47

Why is the social marginal benefit of a common property smaller than the value that people,on average,receive from it?

A) Because use of a common property is nonrivalrous.
B) Because when one additional person uses the common property,it lowers the value that others receive from it.
C) Because entrance fees must be taken into account when determining the social benefit derived from a common property.
D) Because "free riders" will use the common property without contributing to its costs.

Question 48

Free riding would be an appropriate description of which of the following behaviors?

A) People who enjoy having nature conserved by The Nature Conservancy but who do not contribute to the organization.
B) People crowding into a public park on a nice summer day.
C) A fisher putting a more powerful motor on her boat so as to get to the fishing grounds before others.
D) Computer software developers who do not charge for their finished programs.

Question 49

Common Property II

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.




-Refer to Common Property II.Suppose the common property becomes privately owned.If the owner charges a competitive entrance fee for the right to use the property,social gain will equal

A) area C + D + F + G + I.
B) area F + G + H + I.
C) area A + B + C + D + F + G + I.
D) area A + B + C + D + E + F + G + H + I.

Question 50

When one person consumes a nonexcludable good,

A) others cannot be prevented from also consuming it.
B) it can be provided to others for no additional cost.
C) the amount available for others to consume is reduced.
D) any other users will receive zero economic rent from it.

Question 51

Which of the following is an example of a good that is excludable and nonrivalrous?

A) A fishery.
B) Cable television.
C) Over the air television broadcasts.
D) Disney World.

Question 52

Who tends to receive the benefits from a public good that increases the desirability of living in a certain area?

A) Government.
B) Residents.
C) Landlords.
D) No one.

Question 53

Common Property II

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.




-Refer to Common Property II.If the common property is privately owned,the owner earns revenue equal to

A) Area C + D.
B) Area F + G.
C) Area C + D + F + G.
D) zero.

Question 54

A 100 acre wood used by four people for collecting firewood is common property.The socially efficient use of the wood could be achieved by assigning property rights

A) only if they go to whichever of the four most values the wood.
B) only if they are divided equally among all four users.
C) only if the are divided according to those who have been using it the longest.
D) to any of all of the four.

Question 55

Suppose that when one person consumes a good,it is possible to provide it to others at no additional cost.Such a good is called

A) nonexcludable.
B) nonrivalrous.
C) a free good.
D) a Clarke good.

Question 56

Why do private markets tend to undersupply nonrivalrous goods?

A) Because free riders will refuse to pay for these goods.
B) Because the tragedy of the commons will reduce their value to zero.
C) Because people have an incentive to understate their preferences for these goods.
D) Because the efficient price for these goods is zero.

Question 57

A market failure occurs when

A) shortages or surpluses of some good cannot be eliminated.
B) a private market cannot provide a good in socially efficient quantities.
C) consumers' surplus falls to zero.
D) property is privately owned and people behave competitively.

Question 58

Private markets tend to undersupply nonexcludable goods because of

A) individuals' incentives to be untruthful.
B) overcrowding.
C) free riding.
D) dissipated rents.

Question 59

If the government conducts a survey asking it citizens how much they value having potholes filled in,we can expect

A) an accurate evaluation of the work.
B) citizens to understate the value of the work.
C) citizens to exaggerate the value of the work.
D) most citizens to refuse to answer.

Question 60

Common Property II

The following questions refer to the accompanying diagram, which shows the benefits and costs associated with the use of a common property.




-Refer to Common Property II.If the common property is privately owned,the amount of the good supplied equals

A) Q_O
B) Q_C
C) zero.
D) none of the above.

Question 61

When a Clarke tax is used to finance a public good,each person's tax equals

A) the amount that he is willing to pay for the good.
B) the difference between the value he places on the public good and its cost.
C) the cost of the public good minus the value that other people claim to receive from it.
D) everyone else's tax,with the sum equaling the cost of producing the public good.

Question 62

Which of the following is excludable but not rivalrous in consumption?

A) Cable television
B) Non congested toll roads
C) Near empty gold courses.
D) All of the above.

Question 63

Consider the following:

Question 64

GA 400 is a state highway that runs through part of Atlanta,GA.In order to travel on one portion of GA 400,drivers are required to pay a toll.It follows that section of GA 400 will exhibit non-rivalry in consumption if

A) the road is congested.
B) the road is not congested.
C) the toll is decreased.
D) the the toll is completely removed.

Question 65

Cleantown and Grimyville are identical except for the inferior air quality in Grimyville.All potential residents have identical tastes.Apartments in Cleantown rent for $400 per month.The cost of breathing Grimyville air is $75 per month.The quantity of apartments in each town is fixed.

Question 66

Describe how a Clarke tax is designed and explain how it leads a person to correctly reveal his preferences for a public good.

Question 67

The purpose of a Clarke tax is to

A) give people an incentive to truthfully reveal their preferences for a public good.
B) raise enough revenue to pay for a public good.
C) give producers an incentive to supply nonrivalrous public goods in socially efficient quantities.
D) prevent the dissipation of rents that would occur with a nonexcludable public good.

Question 68

Consider a lake stocked with fish.The total value of fish caught at the lake depends on the number of fishers,as shown in the accompanying table.As the table indicates,1 fisher can catch $36 worth of fish in a day,2 fishers can catch a total of $66 worth of fish,3 fishers can catch a total of $90 worth of fish,and so forth.The fishers are identical,and the opportunity cost of a day at the lake is $18 for each fisher.

Question 69

What is one problem with using a Clarke tax to finance government provision of a public good?

A) People tend to overstate their preferences for the public good when a Clarke tax is imposed.
B) The government may decide against providing the public good,even when it would be efficient to do so.
C) The Clarke tax is not a fair tax,because everyone pays the same amount regardless of income.
D) The revenues collected from the Clarke tax may not cover the cost of the public good.

Question 70

Which of the following would be the most accurate means for the government to obtain information about the value of irrigation water for farmers to be supplied by the construction of a new dam?

A) Survey the farmers.
B) Hire experts to provide an estimate.
C) Use the current cost to farmers of withdrawing water from underground sources.
D) Conduct an economic study of how an increase in water supply would affect farmer income.

Question 71

When access to a common property is unrestricted,why does the resulting social gain fail to be as large as possible? How can an entrance fee increase social gain in this situation?

Question 72

Free-riding is a problem associated with

A) nonrivalrous goods.
B) nonexclusive goods.
C) both nonrivalrous and nonexclusive goods.
D) neither nonrivalrous nor nonexclusive goods.

Question 73

Consider the following:

Question 74

There are two people in an economy.Person A's demand for a public good is Q = 10 - P and person B's demand is Q = 20 - 2P.The highest total that A and B will be willing to pay for six units of the public good is

A) $3
B) $4
C) $7
D) $11