Question 1

Ten friends who love to ski decide to pool their financial resources and equally share the cost of a one-week time-share condominium in Alta, Utah. Suppose that the lift lines at the ski resort become more congested when the ten additional people start to ski. Which of the following statements is not correct?

Accepted Answer

The statement that each of the ten friends would have been better off staying at home is not correct. The fact that there is a negative externality due to the congestion at the ski resort does not necessarily mean that the friends would not have enjoyed skiing together or that the benefits of the trip did not outweigh the costs.

Question 2

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. On these days, electricity is

Accepted Answer

The answer of On hot summer days, electricity-generating capacity is...

Question 3

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

This statement is not necessarily correct as it assumes that the friends derive no benefit from being on the beach despite their willingness to pool their resources and rent a house on Nantucket. While it is true that the addition of nine more beachgoers can increase congestion and decrease the enjoyment of the beach for others, it does not necessarily mean that the nine friends would have been better off staying at home. They may still derive satisfaction from being on the beach and enjoying the amenities of the rental house with their friends, even with the added congestion.

Question 4

A stairwell in a certain office building is always congested at 12:00 p.m. and 1:00 p.m. The congestion is so bad that people have been complaining to the building's owner. Which of the following methods would be the most efficient way of reducing congestion?

Accepted Answer

Charging a fee during peak times creates an economic incentive for people to use the stairwell at less congested times, effectively reducing congestion by allowing only those who value it most to use it during peak times.

Question 5

The enclosure movement in England in the 17^th century represented an attempt to transform

Accepted Answer

The enclosure movement involved consolidating small landholdings into larger farms and privatizing common lands, transforming them from common resources into private property.

Question 6

Congressman Smith and Congresswoman Johnson both consider themselves advocates for the national parks and are introducing different bills designed to benefit the parks. Congressman Smith's bill calls for an increase in the entrance fees. Congresswoman Johnson's bill calls for a decrease in the entrance fees. Which of the bills would be more effective at ensuring the quality of the national parks?

Accepted Answer

Increasing entrance fees can help reduce overuse and generate more revenue for maintenance and conservation efforts, potentially ensuring better quality of the national parks.

Question 7

Which of the following statements is correct?

Accepted Answer

The efficient provision of public goods is intrinsically more difficult than the efficient provision of private goods due to the free-rider problem, which occurs when individuals benefit from the public good without contributing to its provision. Private goods can be efficiently provided through private markets where individuals pay for what they consume, but public goods require government intervention or other mechanisms to ensure that individuals contribute to their provision. The other statements are not correct.

Question 8

Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking on summer afternoons. Otherwise, it is a great place. An efficient solution to the parking problem would be to

Accepted Answer

By charging higher prices for parking during busy times, it encourages people to carpool or find alternative transportation to the park. It also generates revenue for the park, which can be used towards maintenance and improvements. Prohibiting parking or policing the area can deter visitors and create a negative experience, while doing nothing does not solve the problem.

Question 9

Why has the value of ivory threatened the extinction of the elephant, whereas the value of beef has enhanced the survival of the cow?

Accepted Answer

The value of ivory has threatened the extinction of elephants because they are considered a common resource, meaning that they are not privately owned and are often hunted for their ivory illegally. The value of beef, on the other hand, has enhanced the survival of cows because they are typically privately owned and raised for their meat, providing economic incentives for their owners to maintain and increase their populations.

Question 10

Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. When the weather is nice, it is difficult to find parking, and the trash cans overflow with food wrappers on summer afternoons. Otherwise, it is a great place. The park is a common resource because

Accepted Answer

The park is a common resource because if too many people use it, one person's use diminishes other peoples' use. This is evident from the fact that it is difficult to find parking and the trash cans overflow on summer afternoons when more people use the park. Thus, it is a shared resource and the use of one person affects the use of others.

Question 11

Pollution is a

Accepted Answer

The answer of Pollution is a
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Question 12

Many species of animals are common resources, and many must be protected by law to keep them from extinction. Why is the cow not one of these endangered species even though there is such a high demand for beef?

Accepted Answer

Cows are privately owned, which incentivizes their owners to breed and maintain them, ensuring their population remains stable despite high demand.

Question 13

It is common knowledge that many U.S. national parks have become overused. One possible solution to this problem is to

Accepted Answer

Increasing entrance fees would discourage some visitors from entering the park and could also generate revenue for maintenance and improvements to the park. Decreasing camping permit fees or requiring all visitors to register would not necessarily address the issue of overuse. Selling the land would completely undermine the purpose of national parks as protected public lands.

Question 14

Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to the state with the understanding that the land will be used as a state beach that anyone may use without paying any fees. This state beach

Accepted Answer

The state beach will tend to be overused because it is nonexcludable, meaning it is available for anyone to use without paying any fees. This also means it is a common resource when it becomes crowded on sunny summer weekends, as everyone is competing for the same resources (like parking spots and beach space). As a result, it is also rival in consumption when it becomes crowded on sunny summer weekends, as there are limited resources that multiple people want to use.

Question 15

Elephant populations in some African countries have started to rise because

Accepted Answer

The answer of Elephant populations in some African countries have...

Question 16

Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to the state with the understanding that the land will be used as a state beach. Seymour wants an efficient way to prevent overcrowding at the beach, so he should require

Accepted Answer

Charging an entry fee on summer weekend days is the most efficient way to prevent overcrowding at the beach. This will discourage some visitors from coming on the busiest days, and the revenue generated from the fee can be used to manage and maintain the beach. Limiting the number of visitors without an entry fee will not be as effective,and it may discourage people from visiting the beach altogether. Charging the same entry fee regardless of the day of the week or time of year may not discourage overcrowding on busy days. Only allowing local residents may also not be as effective, as it could lead to resentment from non-local visitors who may also contribute to the beach's revenue through the entry fee.

Question 17

On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. Suppose that the Minnesota State Park Service institutes a variable fee structure. On weekdays when the picnic areas get little use, the fee is zero. On normal weekends, the fee is $8 per person. On holiday weekends, the fee is $14 per person. The fee system corrects a problem known as the

Accepted Answer

The fee system corrects the problem of the Tragedy of the Commons, which occurs when a resource is held in common and is therefore prone to overuse and degradation. In this case, the picnic areas are becoming overcrowded on holiday weekends, reducing the value of picnicking for everyone. By instituting a fee structure that varies based on demand, the park service can discourage overuse and ensure that everyone who wants to use the picnic areas can do so without overcrowding. The Coase theorem deals with the allocation of property rights and the free rider problem deals with the incentive to not contribute to a public good. The public goods problem deals with the provision of goods that are non-excludable and non-rivalrous.

Question 18

Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that

Accepted Answer

Allowing individuals to own and raise grizzly bears for meat could provide a legal and sustainable source of grizzly bear paws, potentially reducing illegal poaching and the threat of extinction.

Question 19

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that

Accepted Answer

By raising rates during peak times, consumers have a direct financial incentive to reduce their energy usage, leading to a more efficient allocation of electricity resources. The other options do not provide the same economic incentives for consumers to reduce their usage.

Question 20

An economics professor, upset about the rising cost of textbooks, proposed that his department purchase 50 copies of a statistics book so the students in the statistics class would not have to purchase their own books but rather could borrow a book for the semester and then return it for the next class to use. Which of the following strategies would not prevent a common resource problem with the textbooks?

Accepted Answer

Placing textbooks in a common area without any control or accountability measures can lead to overuse or misuse, as students may not feel responsible for returning them in good condition, leading to a common resource problem.

Quiz 11: Public Goods and Common Resources