Deck 11: Public Goods and Common Resources

Question 1

Raising the living standards of the poor is a public good if people are not concerned about poverty.

Answer 1

False

Question 2

A picnic table is an example of a public good.

Answer 2

False

Question 3

General scientific knowledge is so valuable, that a private company generating this knowledge would never need a government subsidy to be profitable.

Answer 3

False

Question 4

Government needs only to point out which goods the private markets are failing to provide efficiently and then allow the private markets to correct themselves.

Question 5

The government developed the patent system so that private inventors could make a reasonable profit from otherwise rival goods.

Question 6

In nearly all cases the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide.

Question 7

A free rider is someone who receives the benefit of a good and pays for it through taxes.

Question 8

In modern industrialised economies there are goods that can be consumed without paying for them.

Question 9

A fireworks display is a rival good because one person's enjoyment of the fireworks does not reduce anyone else's enjoyment.

Question 10

If an entrepreneur provides a service that people enjoy without paying for, but can be excluded from the service, these people are known as free riders.

Question 11

Only goods that are produced in markets have value to society.

Question 12

Businesses that buy illegally harvested timber products from tropical rainforests are influenced by the external effect of their decision.

Question 13

When one person enjoys the benefit of the legal system, he reduces its benefit to others.

Question 14

The government subsidises basic research in mathematics, physics, economics and other fields in order to correct for private market failure.

Question 15

Prices will always regulate consumption adequately because of the different types of goods in the economy.

Question 16

A New Zealand private nature reserve that holds deer for tourism and hunting, has converted a common resource into a private good.

Question 17

A museum exhibition is excludable because it is possible to prevent someone from seeing the show.

Question 18

The efficient provision of public goods is more difficult than the efficient provision of private goods.

Question 19

Some goods can switch between being public goods and private goods, depending on the circumstances.

Question 20

Suppose the owners of a lighthouse demand payments from a nearby port for the lighthouse service, threatening to turn off the lighthouse otherwise. The lighthouse is now closer to a private good.

Question 21

Provision of electricity is a natural monopoly, but after a certain point it becomes a private good.

Question 22

If cutting down a native forest causes many rare animals to become extinct, a cost-benefit analysis would still class this as a cost, even if there is no market price for species survival.

Question 23

Property rights are important to solving some of the problems of goods that the market does not provide adequately.

Question 24

Roads can be considered either public goods or common resources, depending on how congested they are.

Question 25

Cost-benefit analysis always fails to include free goods like clean air as benefits.

Question 26

Free-to-air television is an example of a club good.

Question 27

Private market failure to optimally allocate common resources is a problem that has only become evident in the last few centuries.

Question 28

When a common resource like grazing land, is plentiful and everyone can get all the good grazing land they want, a tragedy of the commons exists.

Question 29

Apparently, human life does have an implicit dollar value, due to the observable fact that people take voluntary risks every day.

Question 30

A poor way to value human life is to measure how much extra money a person needs to be paid to take on a risky job.

Question 31

In the Tragedy of the Commons, joint action among the individual citizens would be necessary to solve their common resource problem, if government does not intervene.

Question 32

Countries that have completely outlawed domestic elephant hunting are finally seeing elephant populations start to rise.

Question 33

Fish are public goods because there are always enough left to keep reproducing and thus stocks never run out.

Question 34

Government intervention becomes increasingly necessary to solve the problem of common resources as the population grows larger.

Question 35

If Jack and Joe are the only two fishermen in town and neither is bothered by the other's fishing, the fishing lake is not a common resource.

Question 36

Cost-benefit analysis can account for risk by adjusting benefits and costs by their probability of occurrence.

Question 37

More roads do not solve traffic problems because they encourage people to live farther from work and thus use more road space.

Question 38

The profit motive that stems from private ownership has proven to be detrimental to elephant populations.

Question 39

All animals with a commercial value are protected from extinction by market forces.

Question 40

Private ownership of a common resource works well when the resource is scarce.

Question 41

Private goods are:

A) excludable and rival
B) non-excludable and rival
C) excludable and non-rival
D) non-excludable and non-rival

Question 42

As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because:

A) members of parliament are often experts in the sciences
B) patents correct an unknown portion of the externality
C) benefits are hard to measure
D) all of the above are true

Question 43

The Australian patent system:

A) makes both general and technical knowledge excludable
B) makes only technical knowledge excludable
C) creates a disincentive to invent
D) does all of the above

Question 44

If tuna fish are an oceanic common resource then:

A) preventing over-harvest won't need international cooperation
B) fishers will try to limit their catches without government regulations
C) enforcing agreements to limit fishing will be difficult
D) all of the above

Question 45

Because the benefit each citizen receives from having an educated community is a public good:

A) the free-rider problem causes the private market to undersupply education to the community
B) the government can potentially help the market reach a socially optimal level of education
C) a tax increase to pay for education could potentially make the community better off
D) all of the above are true

Question 46

Due to the externalities associated with public goods and common resources:

A) private markets will lead to an efficient allocation of resources
B) government intervention can potentially raise economic wellbeing
C) private markets will correct for the gain or loss to consumer surplus
D) all of the above are true

Question 47

The market does not provide national defence because:

A) national defence is a public good
B) national defence is subject to free-riders
C) national defence is a common resource
D) the value of national defence is difficult to measure

Question 48

An example of a market failure associated with the provision of public good in the private market is:

A) free-riders pay too much for the good, so it is undersupplied
B) free-riders don't pay for the good, so it is undersupplied
C) free-riders pay too much for the good, so it is oversupplied
D) free-riders don't pay for the good, so it is oversupplied

Question 49

For both public goods and common resources, an externality arises because:

A) something of value has no price attached to it
B) the goods are undervalued by society
C) the social optimum level of output is greater than market equilibrium
D) all of the above are true

Question 50

Common resource goods are:

A) rival and non-excludable
B) rival and excludable
C) non-rival and excludable
D) non-rival and non-excludable

Question 51

The government provides public goods because:

A) private markets are incapable of producing public goods
B) markets are always better off with some government oversight
C) free-riders make it difficult for private markets to supply the socially optimal quantity
D) external benefits will occur to private producers

Question 52

Basic research is a public good because it:

A) is difficult to exclude those who might benefit from it
B) is used to develop public goods
C) always benefits developed countries at the expense of developing countries
D) is a rival good

Question 53

If the government allows landowners to kill a number of tigers that roam on their property and sell their remains then:

A) poachers will try to kill as many tigers as possible
B) landowners have more incentive to protect tigers on their land
C) landowners have more incentive to try to kill as many tigers as possible
D) poachers will buy land to protect the tigers

Question 54

Which of the following would be considered a common resource good?

A) cable television
B) bottled natural mineral water
C) a congested public park
D) electricity consumption by a household

Question 55

Markets work well for some goods, but poorly for others. For which of the following goods would markets be expected to work well?

A) clean air
B) restaurants
C) wild elephants
D) public healthcare

Question 56

Goods that are non-excludable and non-rival are:

A) public goods
B) private goods
C) natural monopolies
D) common resources

Question 57

A good is rival if:

A) one person's use of the good diminishes another person's enjoyment of it
B) the government regulates its availability
C) it is not a normal good
D) people can be prevented from using it

Question 58

Which of the following would be considered a private good?

A) a telecommunications service
B) a mobile phone advertisement
C) a mobile phone case
D) a telecommunications tower

Question 59

A huge, very busy museum in Europe is:

A) non-excludable and rival
B) non-excludable and non-rival
C) excludable and rival
D) excludable and non-rival

Question 60

What characteristics do public goods and common resources have in common?

A) both types of good are non-rival
B) both types of good are excludable
C) both types of good are rival
D) both types of good are non-excludable

Question 61

To determine if a good is a common resource or a public good, we need to know:

A) if the good is provided by the government
B) if my use of the good reduces its availability to you
C) if the good can be patented
D) if the good is very expensive to produce

Question 62

One way to eliminate the Tragedy of the Commons is to:

A) increase law enforcement in public areas
B) limit access to the commons
C) increase access to the commons
D) provide more public land for recreation

Question 63

If everyone prefers a society without poverty, then which of the following statements is true:

A) taxing private charities will make everyone better off
B) taxing the wealthy to increase living standards for the poor only makes the poor better off
C) taxing the wealthy to increase living standards for the poor makes everyone better off
D) taxing the wealthy to increase living standards for the poor only makes the rich worse off

Question 64

The Tragedy of the Commons occurs because:

A) a common resource is under-utilised
B) a common resource is rival in consumption
C) crimes are committed in public places
D) common resources are subject to exclusionary rules

Question 65

For the purpose of cost-benefit analysis, the value of a human life is sometimes calculated on the basis of:

A) the risks that a person voluntarily exposes herself to in her job and/or recreational choices
B) the value of each individual's assets
C) an infinite value for each life
D) the amount of resources required to adequately sustain life

Question 66

Because of the free-rider problem, respondents to cost-benefit surveys:

A) are unable to evaluate the effect of the project on their personal satisfaction.
B) are typically not benefited directly by government projects
C) have a difficult time identifying explicit costs
D) have little incentive to tell the truth

Question 67

Private markets usually fail to provide lighthouses because:

A) lighthouses cost too much to build, relative to their benefits
B) government intervention makes it hard for private lighthouse owners to compete in the market
C) ship captains have incentives to use lighthouses without paying
D) lighthouses are valued very little by ship captains these days

Question 68

Economists can get some sense about what value people put on their own lives by:

A) evaluating their total asset portfolio
B) studying the risk they are willing to take in their investment decisions
C) comparing wages in risky and less risky occupations, controlling for other determinants of wages
D) None of the above will lead to sensible results

Question 69

When one person uses a common resource, she diminishes other people's enjoyment of it. This is an example of:

A) a market force
B) a negative externality
C) the 'invisible hand
D) excludability

Question 70

Once a common resource is available for consumption, policymakers need to be concerned with:

A) making sure everyone gets a fair chance to consume
B) how much is consumed
C) creating laws that will completely forbid consumption, because the environment is priceless
D) none of the above, because common resources are optimally provided in private markets

Question 71

The free-rider problem is a problem of:

A) too many people needing the same good
B) common resource goods not being subject to property rights
C) incentives
D) people not revealing their true preferences

Question 72

Which of the following statements is true?

A) no single individual can eliminate poverty because the problem is so large
B) private charities use taxes to escape the free-rider problem
C) there would be no poverty problem if it was left up to private charity
D) everyone agrees on what role the government should play in fighting poverty

Question 73

A town engineer comes to the town council with a proposal to build a traffic light at a certain intersection that currently has a stop sign. The benefit of the traffic light is increased safety. In fact, the traffic light will reduce the incidence of fatal traffic accidents by 50 per cent per year. Which of the following statements is true?

A) the project should definitely be accepted
B) the full cost of the stop light will be relatively small since it only includes the purchase and installation costs
C) the decision to install the light is likely to require a complex evaluation of the trade-off between the worth of human life and the lost time waiting for the light to change signals
D) the cost will invariably outweigh the benefit

Question 74

National defence and basic research have in common:

A) that they are both common resources
B) that they are both difficult to value
C) that they are both lucrative for the companies that provide them
D) that they are both natural monopolies

Question 75

The government is deciding whether to build a new $2 billion highway from one side of the city to the other. Some business and consumer groups are questioning the value that such an expensive highway will bring to the city. The government says that it has done a cost-benefit analysis which shows that the highway will bring a slightly positive return, and therefore the highway should be built. Which of the following statements is true?

A) Cost-benefit analyses always provide an accurate valuation of a project, so the highway should be built.
B) Cost-benefit analyses do not always reflect people's true valuation of a project, so the highway should not be built.
C) It is not possible to put a dollar value on a highway, so the highway should be built.
D) Cost-benefit analyses are rough approximations at best, so the highway should only be built if very strong evidence in favour is provided.

Question 76

What is necessary to convert a wireless internet connection into a common resource?

A) low connection fees
B) high connection fees
C) no encryption on the network
D) encryption on the network

Question 77

In the 1950s in Australia, estuarine crocodiles were hunted almost to extinction for their leather. This means the crocodiles were a:

A) private good
B) public good
C) common resource
D) club good

Question 78

Tim works for the government and is implementing a new government policy to set up spacious yoga studios at all state primary schools. The general public will be able to attend classes in the studios but Tim is still is trying to decide on a pricing structure. What pricing structure should Tim suggest the government adopt for the studios and why?

A) participants shouldn't pay for their own class because a yoga class is a private good
B) participants should pay for the classes out of their taxes because yoga classes are a public good
C) participants shouldn't pay for their own class because a yoga class is a common resource
D) participants should each pay for their own class because yoga classes are excludable and rival

Question 79

When private costs differ from social costs, which of the following must be present?

A) excludable resources
B) a negative externality
C) a natural monopoly
D) poor profit incentive to capitalise on the resource

Question 80

Once it becomes obvious that a common resource is being overused:

A) market forces cause the use of the resource to shift to a sustainable level
B) society voluntarily limits its use of the good
C) it continues to be overused because individuals have no incentive to reduce their use
D) the good becomes a natural monopoly