Question 1

Negative externalities and the tragedy of the commons are problems that have a common source.What is this common source?

Accepted Answer

The common source of negative externalities and the tragedy of the commons is a lack of clearly defined and enforced property rights. In the case of negative externalities, producers and consumers do not take into account the costs imposed on others when making their decisions because they do not bear the full cost of their actions. In the case of the tragedy of the commons, individuals tend to overuse or exploit a commonly held resource because no one has a clear property right or ownership stake in the resource. Both problems can be addressed by establishing and enforcing property rights.

Question 2

Haiti was once a heavily forested country.Today,80 percent of Haiti's forests have been cut down,primarily to be burned to create charcoal.The reduction in the number of trees has lead to devastating floods when it rains heavily.This is an example of

Accepted Answer

The situation in Haiti exemplifies the tragedy of the commons, where common resources, such as the forests in Haiti, are overused and abused by individuals who act in their own self-interest, leading to negative consequences for society as a whole. The lack of a mechanism to assign property rights over the forests has resulted in their depletion and the subsequent floods, making this an example of the tragedy of the commons.

Question 3

Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-16 shows their willingness to pay for different quantities of street lights,the market demand for street lights,and the marginal cost of installing the street lights.
-Refer to Figure 5-16.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

Accepted Answer

Private bargaining between Amit and Bree is likely to result in the optimal quantity of street lights being installed as they both have an incentive to reach an agreement that benefits both of them. If one party demands a higher contribution than the other is willing to pay, then the installation would not be economically viable. Thus, they will agree to pay according to their willingness to pay as indicated by their respective demand curves in order to achieve the optimal quantity of street lights. Splitting the cost of installation equally or having one party pay for the entire cost would not be fair or optimal solutions.

Question 4

"When it comes to public goods,individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

Accepted Answer

The answer of "When it comes to public goods,individuals do...

Question 5

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

Accepted Answer

A quasi-public good is a good that has characteristics of both a public good and a private good. While the consumption of a quasi-public good by one person does not necessarily reduce the amount available for everyone else, it may not be accessible to all individuals or may come at a cost. Examples of quasi-public goods include parks and libraries.

Question 6

Goods differ on the basis of whether their consumption is rival and excludable.Explain the terms "rivalry" and "excludability" as they are used to define goods.List the four categories of goods,and define these categories in terms of rivalry and excludability.

Accepted Answer

The answer of Goods differ on the basis of whether...

Question 7

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Accepted Answer

The social benefit is the total benefit to society and includes the sum of all private benefits plus any external benefits that are not captured by individuals. This is represented by the vertical sum of the demand curves for the public good.

Question 8

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

Accepted Answer

The answer of An important difference between the demand for...

Question 9

State whether each of the following goods and services is nonrival,nonexcludable or both:
a.A toll road
b.A public park
c.A lighthouse
d.An art museum
e.A radio broadcast of "A Prairie Home Companion"

Accepted Answer

The answer of State whether each of the following goods...

Question 10

Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-16 shows their willingness to pay for different quantities of street lights,the market demand for street lights,and the marginal cost of installing the street lights.
-Refer to Figure 5-16.What is the optimal quantity of street lights to install?

Accepted Answer

The optimal quantity of street lights to install is where the marginal cost intersects with the market demand, which is at 6 street lights. At this quantity, both Amit and Bree are willing to pay $30 for each street light, and the total cost of installing 6 street lights is $180, which is equal to the total amount that they are willing to pay. Therefore, installing 6 street lights maximizes the total net benefit for both Amit and Bree.

Question 11

A product is considered to be excludable if it is jointly owned by all members of a community.

Accepted Answer

Excludability means that non-owners can be prevented from using or accessing the product. Joint ownership would not allow for exclusion of non-owners, so it is not excludable.

Question 12

Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-16 shows their willingness to pay for different quantities of street lights,the market demand for street lights,and the marginal cost of installing the street lights.
-Refer to Figure 5-16.How much is Bree willing to pay per street light to have 4 street lights installed?

Accepted Answer

To find how much Bree is willing to pay per street light to have 4 street lights installed, we can look at the point where her willingness to pay intersects with the quantity of 4 on the horizontal axis. This point corresponds to the vertical line where the quantity of 4 intersects with Bree's demand curve, which is located at $1,800 per street light.

The best choice for both Amit and Bree is to install 4 street lights since this is the quantity where their combined willingness to pay is highest and the marginal cost of installing the street lights is equal to the market price, resulting in the highest possible joint economic surplus.

Question 13

If the United States and other developed nations pay the cost of reducing public emissions,developing nations such as China could benefit from the reduction while not contributing to it.In this sense,one can think of reducing carbon emissions as being like a

Accepted Answer

The answer of If the United States and other developed...

Question 14

A quasi-public good differs from a public good in that unlike a public good,it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good.

Accepted Answer

A quasi-public good, also known as a club good, can be restricted to those who have paid for it or are members of a certain group. Unlike public goods, which are non-excludable and available to all, quasi-public goods have excludability, meaning that those who do not pay or are not part of the group cannot enjoy the benefits.

Question 15

A modern example of the tragedy of the commons is the forests in many poor countries.

Accepted Answer

Poor communities often rely on forests for their livelihoods, and without proper regulations or enforcement, these valuable natural resources can be overused and degraded, causing harm to both the environment and the people who depend on it. This is a classic example of the tragedy of the commons.

Question 16

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

Accepted Answer

Elephants in the wild are an example of a common resource because they are not privately owned or controlled and can be accessed and used by anyone.

Question 17

A public good is a good that is both rival and excludable.

Accepted Answer

A public good is a good that is non-rival and non-excludable, meaning that consumption by one person does not diminish the availability of the good for others and that it is difficult or impossible to prevent someone from using it.

Question 18

Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?

Accepted Answer

Access to the commons can be restricted through community norms and laws, such as implementing a system of permits or fees for access to the resource. This can incentivize individuals to use the resource more responsibly and prevent overuse, thereby mitigating the tragedy of the commons. Subsidies and advertising campaigns may not be effective in addressing the issue, and forcing people to move away from the commons may not be feasible or ethical.

Question 19

In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge.Eventually,the grass in the pasture would be depleted and no family's cow or sheep would get enough to eat.The reason the grass was depleted was

Accepted Answer

The situation described in the passage is a classic example of the tragedy of the commons, where a shared resource is depleted because it is nonexcludable (meaning people can't be easily excluded from using it) and rival (meaning consumption by one person reduces the amount available for others). In this case, each family in the village had an incentive to graze as many cows and sheep as possible on the common pasture, since they didn't have to pay for access to it, but this led to overuse and depletion of the resource.

Question 20

Determine if each of the products below displays any of the following characteristics:
(i)rivalry
(ii)nonrivalry
(iii)excludability
(iv)nonexcludability.
a.a freeway during peak commute hours
b.an online college course
c.infectious disease prevention
d.open source software such as Linux
e.a movie showing at Century Theatres

Accepted Answer

The answer of Determine if each of the products below...

Quiz 5: Externalities, environmental Policy, and Public Goods