Question 1

Motorcycle helmet laws have been controversial in some states.Riders prefer the feel of the wind on their faces.Others, however, point out that riders without helmets are more likely to suffer severe injury and run up hospital bills at public expense.Which of the following would most likely reduce the incidence of high bills for helmetless riders?

Accepted Answer

By raising insurance rates for helmetless riders, it puts the financial burden on the individual rather than the public. This may also incentivize riders to wear helmets, reducing the incidence of severe injury and therefore the hospital bills.

Question 2

Students in a class are assigned to groups to work on a project.A grade will be given for each project, and everyone in the group will receive that grade.For the members of a particular group, the grade is a

Accepted Answer

The group project grade is a public good since it is non-excludable (everyone in the group receives the same grade) and non-rivalrous (one person's grade does not take away from another's grade).

Question 3

There is much world concern over the deteriorating condition of the Pyramids and other historical structures in Egypt.While people of all nations enjoy visiting these structures, there has been little financial support for preservation coming from within Egypt or from elsewhere.Economists would describe this as an example of

Accepted Answer

The lack of financial support for preservation can be attributed to the free rider problem. People enjoy visiting these structures but do not want to contribute financially towards their preservation, assuming that someone else will take care of it. This leads to insufficient funding and neglect of the structures’ upkeep.

Question 4

A public good is

Accepted Answer

A public good is characterized by its non-excludability, meaning its benefits cannot be restricted to a small group of people, and its non-rivalrous nature, where one person's consumption of the good does not reduce the amount available for others.

Question 5

National defense and coastal lighthouses are examples of

Accepted Answer

National defense and coastal lighthouses are both examples of public goods as they provide benefits to society as a whole and are non-excludable, meaning that it is difficult to prevent anyone from enjoying the benefits they offer.

Question 6

The "free rider" problem occurs when a good is

Accepted Answer

The "free rider" problem occurs when a good is non-excludable, meaning that individuals cannot be effectively excluded from using the good. This often leads to individuals choosing not to pay for the good but still benefiting from its existence or use, resulting in a free rider problem.

Question 7

A commodity is ____ if it is used up when someone consumes it.

Accepted Answer

A depletable commodity is one that is used up when someone consumes it, such as natural resources like oil or coal. Marginal refers to the additional benefit gained from consuming one more unit of a good, scalable refers to the ability to expand production without increasing costs proportionally, and replaceable refers to being able to substitute one good for another.

Question 8

Which of the following is not a public good?

Accepted Answer

The latest Walt Disney movie is not a public good because it is rivalrous (meaning once someone else consumes or purchases it, it is no longer available for others to consume) and excludable (meaning it can be withheld from those who do not pay for it). Public goods are non-rivalrous (meaning one person's consumption does not diminish another person's ability to consume) and non-excludable (meaning it is not possible to prevent people from using or benefiting from it). Coastal lighthouses, national defense, and flood-control levees are all examples of public goods.

Question 9

Public goods are

Accepted Answer

All of the choices are correct. Public goods are valuable socially, they are not depletable and not excludable, and they are subject to the "free rider" problem where individuals can benefit from the public good without contributing to its provision.

Question 10

Because smoking causes illness and disability to smokers, society must maintain more health-service capacity than it would need in the absence of smoking.Since the cost of maintaining this capacity is covered to a substantial degree by health insurance, even nonsmokers must pay higher premiums.Also, smokers hurt nonsmokers as a result of "passive smoke." The Rand Corporation estimates these costs to be 29 cents per pack of cigarettes.Cigarette taxes average 37 cents per pack.Based on the economist's definition of efficiency, it follows that

Accepted Answer

The economist's definition of efficiency involves aligning costs with benefits. If the external costs (healthcare costs and passive smoke harm) are estimated at 29 cents per pack and the tax is 37 cents, the tax exceeds the external costs by 8 cents. This suggests that the tax is higher than necessary to cover the external costs, leading to a situation where cigarette production might be lower than the efficient amount because the tax reduces consumption more than is needed to account for the external costs.

Question 11

Private goods are characterized by two important attributes.What are they?

Accepted Answer

Private goods are commodities that are excludable, meaning that those who do not pay for them do not have access to them. Private goods are also depletable since each unit consumed by one person takes away from what is available for others to consume. Therefore, the two important attributes of private goods are depletability and excludability, which are both reflected in option D.

Question 12

The economic justification for public subsidies to university research is based on

Accepted Answer

The economic justification for public subsidies to university research is based on the external benefits of research and development to the economy as a whole, particularly in terms of promoting economic growth. Research and development can lead to new technologies, products, and services that can improve productivity, create jobs, and generate wealth for society beyond the immediate benefits to the university and its students. A and B may be benefits, but they are not the primary justification for public subsidies to university research. D is a possible benefit, but it is not the primary economic justification for public subsidies to university research.

Question 13

Without government intervention, public goods would

Accepted Answer

Public goods are goods that are non-excludable and non-rivalrous, meaning that they cannot be effectively restricted from use and one individual's use does not diminish the availability to others. From an economic standpoint, this means that it is difficult for private markets to provide public goods because there is no profit motive to do so, and individuals can benefit from the use of public goods without contributing to their production. Without government intervention, it is likely that public goods would not be provided at all or would be undersupplied.

Question 14

A public good is

Accepted Answer

A public good is nonexcludable and nondepletable, meaning that it is not possible to prevent someone from using it and one person's use does not diminish it for others. Therefore, options A, B, and C are incorrect.

Question 15

A true public good is characterized by

Accepted Answer

A true public good is defined as non-excludable and non-depletable. Non-excludability means that the good cannot be excluded from anyone who wants to use it, while non-depletable means that the use of the good by one person does not lead to its depletion or reduction in availability for others.

Question 16

The City Symphony presents three open-air concerts in the city park pavilion during the spring and summer.Many who attend make donations for symphony expenses, but the donation is not required.Some who attend make no contributions.Economists would

Accepted Answer

Noncontributors are benefiting from the concert without paying for it, making them free riders. They are able to enjoy the benefits of the symphony because others are paying for it.

Question 17

If interest rates fall, the opportunity cost of spending money today rather than tomorrow

Accepted Answer

When interest rates fall, the opportunity cost of spending money today rather than tomorrow also falls. This is because the cost of borrowing money decreases, making it easier to finance purchases with loans or credit. As a result, people may be more willing to spend money now, knowing that they can pay it back later at a lower cost.

Question 18

The cable and subscription TV business is plagued with the problem of "signal theft." People use illegal receivers to capture the company's signal without paying.Enforcement of the company's property right is very expensive.This problem emerges because TV signals are basically

Accepted Answer

TV signals are non-excludable and non-rivalrous in consumption, which makes them an example of public goods.

Question 19

Producers of computer software are plagued with the problem of "pirating", that is, many people copy software legally purchased by others.The industry estimates that for each legal copy of a program, there are two pirated copies in use.The industry wants strict laws for the enforcement of its "intellectual property rights," but enforcement is obviously very difficult.Economists call this problem

Accepted Answer

The problem described is that of nonexcludability, as it is difficult to prevent individuals from copying and using a software program once it has been purchased by someone else. This creates a negative externality for the software producers, as their sales are reduced due to pirating.

Question 20

Which of the following is not true for a public good?

Accepted Answer

Public goods include both material and non-material commodities such as clean air, national security, and scientific knowledge.

Quiz 15: The Shortcomings of Free Markets

Students in a class are assigned to groups to work on a project.A grade will be given for each project, and everyone in the group will receive that grade.For the members of a particular group, the grade is a

A public good is

National defense and coastal lighthouses are examples of

The "free rider" problem occurs when a good is

A commodity is ____ if it is used up when someone consumes it.

Which of the following is not a public good?

Public goods are

Private goods are characterized by two important attributes.What are they?

The economic justification for public subsidies to university research is based on

Without government intervention, public goods would

A public good is

A true public good is characterized by

The City Symphony presents three open-air concerts in the city park pavilion during the spring and summer.Many who attend make donations for symphony expenses, but the donation is not required.Some who attend make no contributions.Economists would

If interest rates fall, the opportunity cost of spending money today rather than tomorrow

The cable and subscription TV business is plagued with the problem of "signal theft." People use illegal receivers to capture the company's signal without paying.Enforcement of the company's property right is very expensive.This problem emerges because TV signals are basically

Which of the following is not true for a public good?