Question 1

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

Accepted Answer

The rational individual will choose to exploit the overfished tuna stock because the marginal private cost of harvesting the fish is lower than the marginal social cost. This means that the individual does not bear the full cost of their actions, as the depletion of the tuna stock affects the entire society. Therefore, the private cost is lower than the full cost, leading to overexploitation of the resource.

Question 2

Private producers have no incentive to provide public goods because

Accepted Answer

Private producers have no incentive to provide public goods because once produced, it will not be possible to exclude those who do not pay for the good, leading to free-riders who consume the good without contributing to its production. This makes it difficult for private producers to earn a profit and creates a market failure known as the free-rider problem.

Question 3

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

Accepted Answer

The government is likely to evaluate the costs and benefits of producing the public good to determine the quantity of it that should be supplied. This involves analyzing the costs of building and maintaining the project against the benefits it will provide to society. Factors such as economic efficiency, equity, and the public interest will also be considered in the decision-making process. Surveys and estimation of market demand may be used in some cases to inform the decision, but they are not the primary methods used to determine the quantity of a public good to be supplied. A vote in Congress may be used to allocate funding for the project, but it would not be the sole method used to determine the quantity of the public good to be supplied.

Question 4

Figure 5-15
  
Figure 5-15 shows the market for Atlantic salmon, a common resource.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂.
-Refer to Figure 5-15.The current market equilibrium output is partly the result of overfishing.In that case, what does S₂ represent?

Accepted Answer

S₂ represents the social marginal cost of harvesting salmon, as it takes into account the negative externalities (such as overfishing) that are imposed on society as a whole. The economically efficient output is where the social marginal cost equals the social marginal benefit, which is at point Q₂.

Question 5

How does the construction of a market demand curve for a private good differ from that for a public good?

Accepted Answer

The answer of How does the construction of a market...

Question 6

Which of the following is an example of a common resource?

Accepted Answer

Sea otters in the coastal waters of the Pacific Ocean are an example of a common resource because they are not owned by anyone and are available for anyone to use. Other examples of common resources include air and water. The other options listed are not common resources as they are either privately owned (catfish in a private pond) or provided by the government (impounded dogs and public health care services).

Question 7

In economics, the term "free rider" refers to

Accepted Answer

A free rider is someone who benefits from a good or service without paying for it. This often occurs in situations where a public good is provided, such as a park or road, where it is difficult to exclude people from using it and individuals may choose not to contribute because they are aware that others will cover the costs.

Question 8

The demand curve for a public good is also called the

Accepted Answer

The demand curve for a public good is also called the marginal social benefit curve because it represents the willingness of society to pay for an additional unit of the public good, taking into account the benefits received by all individuals in society. The other options are not accurate descriptions of the demand curve for a public good.

Question 9

Figure 5-15
  
Figure 5-15 shows the market for Atlantic salmon, a common resource.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂.
-Refer to Figure 5-15.The current market equilibrium output is partly the result of overfishing.In that case, what does S₁ represent?

Accepted Answer

The answer of Figure 5-15
  
Figure 5-15 shows the...

Question 10

The market demand for a public good can be determined by

Accepted Answer

The market demand for a public good can be determined by adding up how much each consumer is willing to pay for each unit of the public good. This is because public goods are non-excludable, meaning that once they are provided, everyone has access to them. Therefore, the demand for public goods is based on individuals' willingness to pay for them, rather than how much they actually consume.

Question 11

Which of the following exemplifies the tragedy of the commons?

Accepted Answer

The tragedy of the commons refers to a situation where a common resource is overused or abused because individuals act in their self-interest rather than considering the common good. In this case, the Malaysian tapir is a resource that is being hunted by poachers for their own benefit, leading to a decline in the tapir population.

Question 12

For-profit producers will produce only private goods because

Accepted Answer

The answer of For-profit producers will produce only private goods...

Question 13

A tragedy of the commons occurs when a resource is

Accepted Answer

A tragedy of the commons occurs when a resource is rivalrous (meaning use by one person diminishes its availability to others) and non-excludable (meaning it is difficult or impossible to prevent others from using the resource). Non-rivalrous resources can be used by multiple individuals without affecting availability, and excludable resources can be restricted to specific individuals or groups. Therefore, the only option that fits the criteria for a tragedy of the commons is B) rival and non-excludable.

Question 14

Figure 5-15
  
Figure 5-15 shows the market for Atlantic salmon, a common resource.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂.
-Refer to Figure 5-15.Identify the area that shows the deadweight loss from overfishing.

Accepted Answer

The answer of Figure 5-15
  
Figure 5-15 shows the...

Question 15

Which of the following is an example of a common resource?

Accepted Answer

The Sumatran tiger population is a common resource because it is a natural resource that is not owned by anyone, and its use by one person can reduce its availability to others.

Question 16

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Should they hire a housecleaner?

Accepted Answer

Each person values the service at $50, which is greater than the cost of $40 per person if they split it evenly. Therefore, hiring a housecleaner would provide each of them with a net gain in consumer surplus.

Question 17

One difference between the demand for a private good and that for a public good is that

Accepted Answer

With a private good, each consumer can choose their own quantity to consume and there is rivalry in consumption, meaning if one person consumes more, there is less available for others. With a public good, everyone consumes the same quantity and there is non-rivalry in consumption, meaning one person's consumption does not affect the availability for others.

Question 18

The "tragedy of the commons" refers to the phenomenon where

Accepted Answer

The tragedy of the commons describes the exploitation and depletion of a common resource as a result of individuals acting in their own self-interest and overusing the resource. This can lead to long-term negative consequences for everyone who relies on the resource, as it becomes increasingly scarce or depleted.

Question 19

Common resources differ from public goods in that

Accepted Answer

Common resources differ from public goods in that they are rival in consumption, meaning that if one person uses the resource, it reduces the amount available for others. Public goods, on the other hand, are non-rival in consumption, meaning that one person's use does not diminish the availability to others. While common resources are also non-excludable, meaning that it is difficult to prevent people from using them, this is not the primary way in which they differ from public goods. The other options listed are not accurate descriptions of the difference between common resources and public goods.

Question 20

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Suppose Bella is lazy and a spendthrift and Sefronia suspects that Bella will be willing to pay $80.What is Sefronia likely to do, given that she is as rational as any other person?

Accepted Answer

The answer of Sefronia and Bella share an apartment and...

Quiz 5: Externalities, Environmental Policy, and Public Goods

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

Private producers have no incentive to provide public goods because

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

How does the construction of a market demand curve for a private good differ from that for a public good?

Which of the following is an example of a common resource?

In economics, the term "free rider" refers to

The demand curve for a public good is also called the

The market demand for a public good can be determined by

Which of the following exemplifies the tragedy of the commons?

For-profit producers will produce only private goods because

A tragedy of the commons occurs when a resource is

Figure 5-15 Figure 5-15 shows the market for Atlantic salmon, a common resource.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂. -Refer to Figure 5-15.Identify the area that shows the deadweight loss from overfishing.

Which of the following is an example of a common resource?

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Should they hire a housecleaner?

One difference between the demand for a private good and that for a public good is that

The "tragedy of the commons" refers to the phenomenon where

Common resources differ from public goods in that