Question 1

Tradable allowances may effectively be used to solve the tragedy of the commons problem.

Accepted Answer

Tradable allowances can be used to solve the tragedy of the commons problem because they allocate property rights to the common pool resource, allowing individuals or firms to trade allowances between themselves. This creates a market mechanism where those who value the resource the most will be willing to pay the most for the allowances, leading to an efficient allocation of the resource. As a result, individuals and firms will have an incentive to conserve the resource and use it in a sustainable manner.

Question 2

Tuna are not public goods since they are nonrival but excludable.

Accepted Answer

Tuna are not public goods because they are rival and excludable. They are rival because one person's consumption of tuna reduces the amount available for others, and they are excludable because access to tuna can be restricted through fishing regulations and ownership rights.

Question 3

When public goods are funded through advertising, the problems of both free and forced riders can be mitigated.

Accepted Answer

When public goods are funded through advertising, the cost of providing the good is spread across all people who are exposed to the advertising, regardless of whether they directly benefit from the public good or not. This helps to mitigate the problem of free riders who would not contribute to the funding of the good but still enjoy its benefits. Additionally, if the advertising is persuasive and creates a desire for the public good, more people may willingly contribute to its funding, reducing the problem of forced riders who are required to pay for a good they may not want or need.

Question 4

Advertising is a way for club goods to be given away free.

Accepted Answer

Club goods are goods that are non-rivalrous but excludable, meaning that they can be consumed by multiple individuals without diminishing in quantity, but only those who have paid for them can access them. Advertising can be used as a way to attract more individuals to pay for the club good, effectively giving away the good for free to those who otherwise may not have known about it or been willing to pay for it.

Question 5

A fisherman has an incentive to overfish because catching less fish today doesn't increase the number of fish he can catch in the future.

Accepted Answer

The fisherman's incentive to overfish is due to the fact that the fish population is a common resource, meaning that any fish he leaves in the water today can be caught by another fisherman tomorrow. As a result, the fisherman has no incentive to conserve the fish population, and will instead catch as many fish as he can today, regardless of the impact on the future fish population.

Question 6

The use of advertising makes it possible for the market to produce some public goods.

Accepted Answer

Advertising can create awareness about public goods and their benefits, which can generate demand for these goods in the market. This, in turn, incentivizes producers to supply these goods, even if they may not be profitable on their own. For example, campaigns encouraging people to donate to public television stations or support environmental conservation efforts rely on advertising to increase public awareness and promote social benefits over individual gains. However, not all public goods necessarily require advertising to be produced.

Question 7

Radio programs serve as an example of a public good that is provided efficiently by economic markets.

Accepted Answer

The answer of Radio programs serve as an example of...

Question 8

Theoretically, when property rights are difficult to establish, multi-country agreements could help to solve the tragedy of the commons, but it has not been possible to establish any such agreement to date.

Accepted Answer

There have been multi-country agreements, such as the Paris Agreement, aimed at addressing issues related to the tragedy of the commons, like climate change.

Question 9

Advertising is an efficient solution to the problem of nonexcludability and nonrivalry.

Accepted Answer

Advertising allows firms to differentiate their products from their competitors in order to make them excludable. Additionally, advertising can increase demand for a product, without reducing the quantity available to other consumers, thus solving the problem of nonrivalry. Therefore, advertising is an efficient solution to the problem of nonexcludability and nonrivalry.

Question 10

Some animals are going extinct because of a lack of property rights over these animals.

Accepted Answer

One of the reasons for the extinction of some animals is the lack of property rights. When ownership and control over an animal or its habitat are undefined or unclear, there is less incentive for individuals or groups to protect and conserve them. This lack of incentives may result in overhunting, habitat destruction, and other unsustainable practices that threaten the survival of the species. By giving people legal rights over wildlife and their habitats, individuals and communities can be motivated to conserve and manage them sustainably.

Question 11

Google is an example of a potential "club good" that is free because of advertising.

Accepted Answer

Google is able to provide its search engine, email, and other services for free because it is supported by advertising revenue. This is an example of a "club good," as it is non-rivalrous (many people can use it at the same time) but excludable (Google can limit access to certain features and data).

Question 12

A public good is a good produced in the public sector.

Accepted Answer

A public good is a type of good that is non-excludable and non-rivalrous in consumption, meaning that it is not possible to prevent someone from using it and one person's use of it does not diminish the availability for others. Public goods can be produced in either the public or private sector.

Question 13

A solution to the tragedy of the commons is to convert common resources to public goods.

Accepted Answer

Converting common resources to public goods does not solve the tragedy of the commons; instead, it involves managing or privatizing the resources to ensure sustainable use and prevent overexploitation.

Question 14

Command and control methods are market-based methods to solving the problem of over-exploitation of common resources.

Accepted Answer

Command and control methods involve government regulations and restrictions, whereas market-based methods involve creating economic incentives to promote sustainable use of resources. Therefore, command and control methods are not market-based methods.

Question 15

Thanks to advertising, the efficient price for public radio service is zero.

Accepted Answer

Advertising revenue can offset the need for listener donations, making the service free for listeners.

Question 16

A solution to the tragedy of the commons is to convert common resources to private goods.

Accepted Answer

By converting common resources to private goods, individuals or companies have a direct and exclusive interest in managing the resources. This can lead to more responsible and efficient use of resources, as each individual or company now bears the costs and benefits of their actions.

Question 17

Entrepreneurs are constantly looking for ways to turn nonexcludable, nonrival goods, such as television, into club goods.

Accepted Answer

This statement is true. Entrepreneurs try to find ways to limit access to nonexcludable goods and make them available exclusively to those who pay, thus turning them into club goods. An example of this is the creation of paid subscription models for online streaming services like Netflix and Hulu.

Question 18

HBO shows are not considered club goods.

Accepted Answer

HBO shows are usually only accessible to those who subscribe to the HBO channel or streaming service, making them a type of exclusive or club good that is not widely available to everyone.

Question 19

The tragedy of the commons problem is a type of negative externality.

Accepted Answer

The tragedy of the commons problem is a type of negative externality where individuals exploit a shared resource without considering the costs imposed on others. It is a classic example of market failure where the market mechanism fails to allocate resources efficiently.

Question 20

Club goods are goods that are excludable but nonrival.

Accepted Answer

Club goods are goods that can be restricted to a certain group of people or consumers (excludable) but can be used by multiple people without diminishing the value or quantity of the good (nonrival). Examples of club goods include private parks, subscription-based online services, etc.

Quiz 19: Public Goods and the Tragedy of the Commons