Deck 11: Public Goods and Common Resources

Question 1

When something of value has no price attached to it,such as a public good,what will likely happen

A)Externalities will be present.
B)The good will be completely used up.
C)Only those who are better off have to pay.
D)Private companies will eventually produce the product and the good will no longer be free.

Answer 1

Externalities will be present.

Question 2

What are common resource goods

A)excludable but not rival in consumption
B)rival in consumption but not excludable
C)both excludable and rival in consumption
D)neither excludable nor rival in consumption

Answer 2

rival in consumption but not excludable

Question 3

Which good would satisfy attributes of a club good

A)a congested public freeway
B)an airline flight that has been overbooked
C)local Internet service
D)public parking

Answer 3

local Internet service

Question 4

What is an example of a club good

A)Internet service
B)tornado sirens
C)clothing
D)the environment

Question 5

What is a good that is rival in consumption but not excludable

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

Question 6

What characteristics do public goods and common resources have in common

A)Both goods are nonexcludable.
B)Both goods are excludable.
C)Both goods are rival in consumption.
D)Both goods are nonrival in consumption.

Question 7

What are the fish in the ocean an example of

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

Question 8

In an economy,when goods do not have a price,who or what primarily ensures that the good is produced

A)entrepreneurs
B)the government
C)charities
D)individual citizens

Question 9

For most goods in an economy,what is the signal that guides the decisions of buyers and sellers

A)greed
B)the self-interest of both buyers and sellers
C)prices
D)profits

Question 10

Which of the following would be considered a common resource good

A)Internet service
B)bottled natural mineral water
C)uncongested toll roads
D)fish in the ocean

Question 11

When one person uses a common resource,such as fish in the ocean,what would be the most likely outcome

A)Other people are not likely to be worse off.
B)Other people are likely to be compensated for their loss.
C)He or she neglects to account for external effects.
D)There will still be enough left since one person cannot make a major impact.

Question 12

When one person uses a common resource,which of the following outcomes will most likely occur

A)An externality will arise.
B)Other people will be neither better nor worse off.
C)It will be simple to charge him or her for usage of it.
D)No one else will be able to use the common resource.

Question 13

When a good is excludable but not rival in consumption,what is it an example of

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

Question 14

What are common resources

A)Both rival in consumption and nonexcludable.
B)Both rival in consumption and excludable.
C)Both nonrival in consumption and excludable.
D)Both nonrival in consumption and nonexcludable.

Question 15

What happens when goods are available in an economy free of charge

A)Market forces cannot be used to allocate resources.
B)Too many of these goods will be produced since there is no cost of production.
C)The product will have no value for the majority of the population.
D)Goods are not available in market economies free of charge.

Question 16

Why does the market not provide national defence

A)It is impossible to prevent any single person from enjoying the benefit of national defence.
B)The fixed cost of national defence is too high.
C)The necessary resources for national defence are not available in the private sector.
D)Private sectors are not willing to pay for it.

Question 17

For both public goods and common resources,why does an externality arise

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 lower than the market equilibrium's.
D)There are no defined property rights.

Question 18

How are club goods classified

A)excludable but not rival in consumption
B)rival in consumption but not excludable
C)both excludable and rival in consumption
D)neither excludable nor rival in consumption

Question 19

What are both public goods and common resources

A)nonrival in consumption
B)both nonexcludable and nonrival in consumption
C)excludable
D)nonexcludable

Question 20

Goods that are not excludable are usually which of the following

A)higher priced than excludable goods
B)higher priced than rival in consumption goods
C)in short supply
D)free of charge

Question 21

What are most goods in the economy

A)club goods
B)common resources
C)public goods
D)private goods

Question 22

How are private goods classified

A)as both excludable and nonrival in consumption
B)as both nonexcludable and rival in consumption
C)as both excludable and rival in consumption
D)as both nonexcludable and nonrival in consumption

Question 23

What can we do to deal with 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 well-being.
C)Private markets will correct for the gain or loss to consumer surplus.
D)Government intervention can completely eliminate the free-rider problem.

Question 24

What do goods that are excludable include

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

Question 25

What do goods that are NOT rival in consumption include

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

Question 26

When is a good excludable

A)when one person's use of the good diminishes another person's enjoyment of it
B)when one person's use of the good increases another person's enjoyment of it
C)when the government can regulate its availability
D)when people can be prevented from using it

Question 27

Which of the following would be considered a private good

A)national defence
B)a public beach
C)local Internet service
D)a bottle of natural mineral water

Question 28

What does it mean when a good is excludable

A)One person's use of the good diminishes another person's ability to use it.
B)People can be prevented from using the good.
C)No more than one person can use the good at a time.
D)Everyone will be excluded from obtaining the good.

Question 29

What results when a good is not excludable

A)The good will be produced as a private good but not as a public good.
B)The good will not be produced since no one values it.
C)The free-rider problem prevents the private market from supplying the good.
D)Everyone can have all they want and the good will have a price of zero.

Question 30

How is a cherry cheesecake classified

A)excludable and rival in consumption
B)excludable and nonrival in consumption
C)nonexcludable and rival in consumption
D)nonexcludable and nonrival in consumption

Question 31

What goods would be considered both excludable and rival in consumption

A)club goods
B)common resources
C)public goods
D)private goods

Question 32

If the local government in Parksville,British Columbia,decided to put on a public Canada Day parade,how would the parade be classified

A)excludable
B)rival in consumption
C)a public good
D)a common resource

Question 33

Why are the public goods not excludable

A)They may be socially desirable but not privately profitable.
B)They may be socially desirable and therefore will be provided by both the government and as a private good.
C)They may be socially desirable and have a lower price so more consumers will be able to afford them.
D)They may be socially desirable but are still generally taxed by the government.

Question 34

What are goods that are nonexcludable and nonrival in consumption

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

Question 35

What does it mean when a good is rival in consumption

A)One person's use of the good diminishes another person's ability to use it.
B)People can be prevented from using the good.
C)No more than one person can use the good at a time.
D)Everyone will be excluded from obtaining the good.

Question 36

What do goods that are rival in consumption include

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

Question 37

Can the market system lead to an efficient outcome in a market for a good like ice cream cones

A)no, because based on the market system alone, an inefficient number of ice cream cones will be produced
B)yes, because at the market equilibrium, the sum of producer surplus and consumer surplus is minimized
C)yes, because price adjusts to determine the supply and demand of the ice cream cones and determine the market equilibrium
D)no, because the price established in the market will not reflect the true value of ice cream cones to consumers

Question 38

How are public goods classified

A)excludable but not rival in consumption
B)rival in consumption but not excludable
C)both excludable and rival in consumption
D)neither excludable nor rival in consumption

Question 39

If one person's use of a good diminishes another person's enjoyment of it,how is the good described

A)rival in consumption
B)nonexcludable
C)normal
D)exhaustible

Question 40

What is an example of a private good

A)Internet service
B)regional weather alerts
C)fish in the ocean
D)a milkshake

Question 41

Because general knowledge is not excludable,which of the following results

A)The government contributes to its production.
B)The cost generally outweighs the benefit to society.
C)Private markets would choose to not supply any general knowledge to society.
D)General knowledge cannot be supplied to the market by anyone since it is not a product.

Question 42

For the government to provide a product with tax revenue,what must be the case

A)The total cost must exceed the total benefit.
B)The government must be able to produce the product cheaper than the private market could.
C)The total benefit must exceed the total cost.
D)The marginal benefit must exceed the marginal cost.

Question 43

What is the difference between technological knowledge and general knowledge

A)General knowledge creation is usually more profitable for the creator.
B)Technological knowledge is excludable and general knowledge is not.
C)General knowledge is excludable and technological knowledge is not.
D)General knowledge is rival in consumption and technological knowledge is not.

Question 44

In 2014,what were per-person expenditures on national defence in Canada

A)$340
B)$460
C)$605
D)$2150

Question 45

Why is national defence a classic example of a public good

A)Private security services are very difficult to find.
B)It is difficult to exclude people from receiving the benefits from national defence once it is provided.
C)Everyone agrees that some level of national defence is important, but only the government knows the optimal amount.
D)If individuals were required to purchase their own armoured tank, there wouldn't be enough tanks to go around.

Question 46

In which of the following goods does the free-rider problem exist

A)fire protection
B)knowledge
C)Internet service
D)congested toll roads

Question 47

Which claim do advocates of antipoverty programs make

A)They are most successfully done by charities.
B)They are a public good.
C)They can be done efficiently by the market system.
D)They should not be done with tax dollars.

Question 48

What causes market failure associated with the free-rider problem

A)a problem associated with pollution
B)benefits that accrue to those who don't pay
C)losses that accrue to providers of the product
D)a project in which costs exceed benefits

Question 49

Why does the government provide public goods

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

Question 50

What is knowledge an example of

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

Question 51

How can the free-rider problem become worse

A)if the government refuses to provide the product
B)if the number of beneficiaries is large
C)if private markets can provide the rival in consumption good
D)if the number of provisions is small

Question 52

You are the mayor of a small town with 2000 residents.The head of your economic development agency recently conducted a survey in which the 2000 residents said that a public concert in the centre of town would be worth $20 to each of them.Since it costs only $5000 to hold the concert,you organized and held the concert,which everyone in town enjoyed.But when you asked for donations to pay for the concert,you only collected $30 in total.What do you know

A)The survey certainly overstated how much the concert was worth to each resident.
B)From the standpoint of total costs and benefits, the cost of the concert certainly exceeded the benefit.
C)The concert was an example of the Tragedy of the Commons.
D)Residents of the town were probably free riders.

Question 53

Why are too few resources devoted to the creation of knowledge

A)Profit-seeking firms undervalue knowledge in their pursuit of revenues.
B)Profit-seeking firms abuse their patents.
C)Profit-seeking firms tend to free-ride on the knowledge that others have developed.
D)Profit-seeking firms tend to rely on existing employee knowledge.

Question 54

What results when a free-rider problem exists

A)Too few resources are devoted to the good.
B)The cost of the good will always be more than the benefit of the good.
C)The good will not be produced.
D)Entrepreneurs will eventually find a way to make free riders pay their share.

Question 55

What is a free rider

A)a person who will only purchase a product on sale
B)a person who receives the benefit of a good but avoids paying for it
C)a person who can produce a good at no cost
D)a person who takes advantage of tax loopholes to lower his taxes

Question 56

What do advocates of antipoverty programs believe about fighting poverty

A)It can make everyone better off.
B)It is most successfully done by charities.
C)It can be done efficiently by the market system.
D)It should not be done with tax dollars.

Question 57

Why is basic research a public good

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

Question 58

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

A)Benefits are hard to measure.
B)Patents correct for an unknown portion of the externality.
C)Members of Parliament are often experts in the sciences.
D)The costs always exceed the benefits.

Question 59

How is the appropriate level of government support for expanding general knowledge determined

A)It is determined by demand and supply.
B)It is accurately determined by government.
C)It can be easily measured by determining the amount where benefits equal cost.
D)It is difficult to determine, since benefits are hard to measure.

Question 60

Why is national defence provided by the government

A)It is impossible for private markets to produce public goods.
B)Products provided by the government can be produced more efficiently.
C)Free riders make it difficult for private markets to supply the socially optimal quantity.
D)If the good were produced in private markets, most likely too much of the good would be produced.

Question 61

Suppose that Martin owns a lighthouse and Lewis owns a nearby port.Martin's lighthouse benefits only those ships that enter Lewis's port.What is the preferred method to combat the free-rider problem

A)Martin charges a fee for all ships that pass by Lewis's port.
B)Martin charges Lewis a usage fee.
C)Martin can exclude Lewis's port from benefiting from the lighthouse by simply turning the power off.
D)Martin sells his lighthouse.

Question 62

The town of Turner Valley does not have any public snow plows.Anyone who wants their street cleared of snow must hire a private snow plow company to do it for $75.Shelby,Ravi,and Mandy all live on a dead-end street,with Shelby living at the very end of it.Each one values snow removal at $50.At present,the snow is never cleared from the street.What can we conclude

A)The current situation is best because the cost of snow removal exceeds what each of them is willing to pay for it.
B)Ravi and Mandy should wait for Shelby to pay for the service because if the snow is cleared all the way to Shelby's house, Ravi and Mandy will get the service for free.
C)The fee charged by the snow removal company is unfairly high.
D)Shelby, Ravi, and Mandy could all be better off if they acted collectively.

Question 63

Why is a cost-benefit analysis of a highway difficult to conduct

A)Analysts cannot estimate the explicit cost of a project that has not been completed.
B)Analysts are unlikely to have access to costs on similar projects.
C)Analysts are not able to consider the opportunity cost of resources.
D)Analysts do not have a price with which to judge the value of the highway.

Question 64

What is the proper method to fight poverty in a society

A)Taxing the wealthy to raise living standards for the poor can potentially make everyone better off.
B)Eliminating taxes aimed at redistributing income will necessarily make rich people better off.
C)Government intervention can cause uneven distribution of the wealth.
D)Private markets can adequately provide charity programs to help the poor despite free-rider problems.

Question 65

When might a lighthouse be considered a private good

A)if there is a second lighthouse nearby, thus preventing a monopoly
B)if the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse
C)if ships are able to enjoy the benefits of the lighthouse without paying for the benefit
D)if a lighthouse benefits many ship captains

Question 66

The privately owned school system in Smalltown has a virtually unlimited capacity.It accepts all applicants and operates on both tuition and private donations.Although every resident places value on having an educated community,the school's revenues have suffered lately due to a large decline in private donations from the elderly population.If the private market quantity of education is below the socially desirable quantity,how can Smalltown remedy its problem

A)by having the local government tax local citizens in order to subsidize education
B)by increasing tuition to compensate for the decrease in donations
C)by increasing teacher wages
D)by lowering enrolment

Question 67

When the government decides to build a new highway,the first step is to conduct a study to determine the value of the project.What is the study called

A)fiscal analysis
B)net value analysis
C)welfare analysis
D)cost-benefit analysis

Question 68

Why it is difficult to use cost-benefit surveys to evaluate government projects

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

Question 69

Assuming that everyone prefers to live in a society without poverty,what do we know about people who do not donate to private charity

A)They receive no external benefit from private antipoverty programs.
B)They decrease the reliance of individuals on antipoverty programs.
C)They free-ride on the generosity of others.
D)They are most likely to be in favour of government-sponsored programs.

Question 70

What is the greatest difficulty with cost-benefit analysis of a public project

A)determining whether government revenue is sufficient to cover the cost of the project
B)determining whom to award the project contract
C)determining the cost of the project
D)determining the value or benefit of the project

Question 71

Why is simply asking people how much they value a highway not a reliable way of measuring the benefits and costs

A)Those who stand to gain have an incentive to tell the truth.
B)Those who stand to lose have an incentive to exaggerate their true costs.
C)Answers to the survey questions relating to cost will always be downwardly biased.
D)Not everyone asked will be using the highway.

Question 72

The value and cost of goods provided in an economy are easier to determine when those goods are which of the following

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

Question 73

When are externalities present in a market

A)whenever a shortage exists
B)whenever the price is higher than equilibrium price
C)whenever private costs differ from social costs
D)whenever the seller is not making a profit

Question 74

Why has a lighthouse long been considered an example of a public good

A)The owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse.
B)There is rarely another lighthouse nearby to provide competition.
C)A nearby port authority cannot avoid paying fees to the lighthouse owner.
D)All passing ships are able to enjoy the benefits of the lighthouse without paying.

Question 75

Suppose that you want to put on a parade in your home town of 1000 people.The cost of the parade is $6000 and each person values the parade at $5.After a month,you have only sold 50 tickets at $5 each.What is the result

A)The local government will put on the parade but you will not.
B)You will still put on the parade but the local government will not.
C)Neither you nor the local government will put on the parade.
D)You and the local government will compete for the parade.

Question 76

Why are most lighthouses operated by the government

A)because of the free-rider problem
B)because lighthouses are no longer valued by society
C)because most lighthouses are only tourist attractions in provincial and national parks
D)because shipping companies would not be able to afford lighthouse upkeep

Question 77

Why do private markets usually fail to provide lighthouses

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 78

Why does the government provide public goods

A)Private markets would not produce any of the good.
B)Private markets would not produce the efficient quantity of the good.
C)Private markets would charge too high a price for the good.
D)Private markets produce public goods less efficiently than the government.

Question 79

Why is cost-benefit analysis important in determining the role of government in our economy

A)Cost-benefit analysis helps government identify all goods in which benefits exceed costs.
B)Cost-benefit analysis identifies the possible gains to society from government provision of a particular good.
C)Cost-benefit analysis identifies the private good markets from the public good markets.
D)Cost-benefit analysis identifies market failure.

Question 80

A lighthouse that primarily benefits a single port owner is most like which type of good

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