Deck 17: Public Goods and Common Resources

Question 1

Which one of the following goods exhibits nonexcludability?

A)a cheeseburger
B)the Internet
C)rides on the U.S. Space Shuttle
D)cable TV
E)air traffic control

Answer 1

E

Question 2

Which of the following quotations describes a nonexcludable and nonrival good?

A)"Mom, Ashley is looking at me."
B)"Mom, Morgan won't let me watch the Backyardigans because she is watching Dora the Explorer."
C)"Mom, Harrison won't let me in his room."
D)"Mom, Taylor told me on the phone that he is also watching the Backyardigans on TV at his house, but I'm not allowed to go over there."
E)"Mom said everyone in this house gets to enjoy the flowers in the garden."

Answer 2

E

Question 3

When a good is nonrival and nonexcludable, it is a

A)natural monopoly good.
B)private good.
C)regulated good.
D)public good.
E)common resource.

Answer 3

D

Question 4

When a city street is not congested, it is

A)a common resource
B)rival and excludable.
C)rival and nonexcludable.
D)a private good.
E)a public good.

Question 5

A good that is rival and nonexcludable is a

A)private good.
B)public good.
C)government good.
D)regulated good.
E)common resource.

Question 6

Which one of the following goods is nonexcludable?

A)a taxi
B)a toll bridge
C)the atmosphere
D)an art museum
E)cable TV

Question 7

Which of the following quotations describes a rival good?

A)"Mom, Ashley is looking at me."
B)"Mom, Morgan won't let me watch the Backyardigans because she is watching Dora the Explorer."
C)"Mom, Harrison won't let me in his room."
D)"Mom, Taylor told me on the phone that he is also watching the Backyardigans on TV at his house."
E)"Mom said everyone in this house gets to enjoy the flowers in the garden."

Question 8

An example of a public good is

A)national defence.
B)a Ford truck.
C)a loaf of bread.
D)a home computer.
E)a television.

Question 9

Which one of the following goods is excludable?

A)a city bus
B)a bridge that does not charge a toll
C)the atmosphere
D)protection from the police force
E)air traffic control

Question 10

A good that is nonrival and excludable is a

A)private good.
B)public good.
C)government good.
D)natural monopoly good.
E)common resource.

Question 11

A public good is

A)nonrival and nonexcludable.
B)produced by monopolies.
C)rival and excludable.
D)rival and nonexcludable.
E)nonrival and excludable.

Question 12

Private goods are

A)nonrival and excludable.
B)nonrival and nonexcludable.
C)always produced in a non-regulated market.
D)rival and excludable.
E)rival and nonexcludable.

Question 13

If a good is a public good,

A)anyone can be excluded from enjoying its benefits.
B)no one can be excluded from enjoying its benefits.
C)consumers must pay a high price to enjoy its benefits.
D)it is rival and excludable.
E)economies of scale exist over the entire range of output for which there is a demand.

Question 14

A common resource is

A)rival and either excludable or nonexcludable.
B)excludable and either rival or nonrival.
C)rival and excludable.
D)rival and nonexcludable.
E)nonexcludable and either rival or nonrival.

Question 15

When a city street is congested, it is

A)a common resource.
B)nonrival and nonexcludable.
C)nonrival and excludable.
D)a private good.
E)a public good.

Question 16

A natural monopoly good is

A)nonrival.
B)excludable.
C)rival.
D)nonexcludable.
E)both A and B.

Question 17

A common resource is

A)regulated and excludable.
B)rival and nonexcludable.
C)nonrival and excludable.
D)rival and excludable.
E)nonrival and nonexcludable.

Question 18

When a good is rival and excludable, it is a

A)natural monopoly good.
B)public good.
C)regulated good.
D)private good.
E)common resource.

Question 19

Suppose Bryan Adams wants to perform a concert in the City Park in Corner Brook Newfoundland.The city officials argue that the only way the concert can be given permission to be performed in the City Park is if it is free of charge.If Bryan Adams agrees to performing free of charge, then the concert is

A)excludable.
B)a private good.
C)nonexcludable.
D)rival.
E)rival and nonexcludable.

Question 20

An example of common resource is

A)fish in the ocean.
B)air traffic control.
C)the Ambassador Bridge which goes between Windsor Ontario and Detroit.
D)the Internet.
E)national defence.

Question 21

The economy's demand curve for a public good is obtained by summing the individual

A)marginal cost curves horizontally.
B)marginal cost curves vertically.
C)marginal benefit curves horizontally.
D)marginal benefit curves vertically.
E)benefit curves diagonally.

Question 22

The efficient scale of provision of a public good occurs where

A)total benefit is at a maximum.
B)total benefit is at a minimum.
C)marginal social benefit is at a maximum.
D)marginal social benefit minus marginal social cost equals zero.
E)marginal social cost is at a minimum.

Question 23

Public goods are provided by government because

A)governments are more efficient than private firms at producing public goods.
B)free-rider problems result in underproduction by private markets.
C)people value national defence very highly.
D)private firms will make an economic profit.
E)private firms do not take into account the impact of external costs.

Question 24

If the marginal social cost of producing a public good is greater than the marginal social benefit, then

A)more than the efficient quantity of the public good is being produced.
B)less than the efficient quantity of the public good is being produced.
C)the efficient quantity of the public good is being produced.
D)the public good is being produced by a private firm.
E)the public good must be a common resource.

Question 25

Use the figure below to answer the following questions.

Figure 17.2.1
Refer to Figure 17.2.1.Curve MBA is Andrew's marginal benefit curve for a public good and curve MBB is Betty's marginal benefit curve for the same public good.If Andrew and Betty are the only two consumers in the economy, which point would be on the economy's marginal social benefit curve?

A)price of $20, quantity of 3
B)price of $20, quantity of 4
C)price of $10, quantity of 4
D)price of $30, quantity of 0
E)price of $60, quantity of 1

Question 26

For a private good, the economy's marginal social benefit curve is the ________ sum of the individual marginal benefit curves and for a public good, the economy's marginal social benefit curve is the ________ sum of the individual marginal benefit curves.

A)vertical; vertical
B)vertical; horizontal
C)horizontal; vertical
D)horizontal; horizontal
E)horizontal and vertical; vertical and horizontal

Question 27

The quantity of a public good produced by private provision

A)is less than the efficient quantity.
B)is equal to the efficient quantity.
C)is greater than the efficient quantity.
D)maximizes total public benefit.
E)maximizes net public benefit.

Question 28

A Big Mac is

A)excludable and rival.
B)nonexcludable and nonrival.
C)nonexcludable and rival.
D)excludable and nonrival.
E)a private good in North America but a natural monopoly good in other countries.

Question 29

Use the figure below to answer the following questions.

Figure 17.2.1
Refer to Figure 17.2.1.Curve MBA is Andrew's marginal benefit curve for a private good and curve MBB is Betty's marginal benefit curve for the same private good.If Andrew and Betty are the only two consumers in the economy, which point would be on the economy's marginal social benefit curve?

A)price of $20, quantity of 3 units
B)price of $20, quantity of 4 units
C)price of $10, quantity of 4 units
D)price of $30, quantity of 0 units
E)price of $60, quantity of 1 units

Question 30

Public choice theory predicts that government

A)acts to promote the redistribution of wealth and income.
B)acts to maximize the amount of campaign contributions.
C)acts to eliminate waste and promote an efficient allocation of resources.
D)makes choices that result in efficient provision of public goods.
E)makes choices that result in inefficient overprovision of public goods.

Question 31

Private provision of public goods

A)fails because the private firm will always go broke.
B)succeeds because public provision is often more costly.
C)succeeds if consumers expect to obtain a benefit from the consumption of the public good.
D)fails because of the free-rider problem.
E)fails because private firms generally charge higher prices than public firms, and therefore lose customers.

Question 32

Free riding can occur if a good is

A)excludable and rival.
B)excludable and nonrival.
C)a private good.
D)nonexcludable and rival.
E)nonexcludable and nonrival.

Question 33

A view of the sunset is

A)excludable and rival.
B)nonexcludable and nonrival.
C)nonexcludable and rival.
D)excludable and nonrival.
E)a private good.

Question 34

Although both cable television and air traffic control are nonrival, they differ from each other because

A)cable television is a private good and air traffic control is a public good.
B)cable television is a public good and air traffic control is a private good.
C)cable television is nonexcludable and air traffic control is a public good.
D)cable television is nonexcludable and air traffic control is excludable.
E)cable television is excludable and air traffic control is nonexcludable.

Question 35

The marginal social benefit curve for a public good is derived by

A)adding the marginal benefits of all individuals at each quantity.
B)adding the quantities demanded by all individuals at each price.
C)surveying consumers and asking how much they use a certain good or service.
D)adding the total benefits for all consumers for a given quantity of the good.
E)finding the maximum amount someone is willing to pay for one more unit of the good.

Question 36

The air in the atmosphere is

A)nonrival and nonexcludable.
B)rival and nonexcludable.
C)nonrival and excludable.
D)rival and excludable.
E)a private good.

Question 37

An economy's marginal social benefit curve for a private good is obtained by summing the individual marginal

A)cost curves horizontally.
B)cost curves vertically.
C)benefit curves horizontally.
D)benefit curves vertically.
E)benefit curves diagonally.

Question 38

Cable television and air traffic control are similar to each other because both of them are

A)excludable.
B)nonexcludable.
C)nonrival.
D)rival.
E)private services.

Question 39

Suppose in a country there are only two persons.Person A is willing to pay $50 to have one unit of a public good produced; person B is willing to pay $60 to have one unit of a public good produced and $50 to have two units produced.A point on the country's marginal social benefit curve for this public good is a price of ________ and quantity demanded of ________.

A)$50; 1 unit
B)$60; 1 unit
C)$110; 2 units
D)$110; 1 unit
E)$55; 1 unit

Question 40

Governments provide public goods such as national defence because

A)governments are more efficient than private firms at producing public goods.
B)of the free-rider problem, which results in underproduction by private firms.
C)people do not value national defence very highly.
D)of the potential that private firms will make excess profit.
E)of external costs.

Question 41

Competition between two political parties will cause those parties to propose policies

A)that are quite different.
B)that are quite similar.
C)of rational ignorance.
D)that reduce the well-being of middle-income families and increasing the well-being of the rich and the poor.
E)that equate total costs and total benefits.

Question 42

The budget of a government department is likely to be efficient if

A)voters are well informed.
B)there is rational voter ignorance combined with special interest lobbying.
C)the political equilibrium can be described in terms of public choice theory.
D)bureaucrats are rationally ignorant.
E)there are negative externalities.

Question 43

The budget of a government department is likely to increase beyond the efficient quantity if

A)voters are well informed.
B)there is rational voter ignorance combined with special interest lobbying.
C)the political equilibrium can be described in terms of social interest theory.
D)bureaucrats are rationally ignorant.
E)there are negative externalities.

Question 44

If voters are rationally ignorant, the quantity of national defence provided by the government will be

A)greater than the efficient quantity.
B)less than the efficient quantity.
C)the least costly quantity.
D)the quantity that maximizes the budget of the Department of National Defence.
E)both A and D are correct.

Question 45

Competitors who make themselves identical to appeal to the maximum number of voters illustrate the

A)principle of maximum differentiation.
B)principle of minimum differentiation.
C)principle of rational ignorance.
D)principle of nonrivalry.
E)principle of excludability.

Question 46

Public choice theory assumes those involved in the political process are motivated by

A)self-interest.
B)the desire to achieve efficiency.
C)dishonesty.
D)public spirit.
E)the desire for maximum profit.

Question 47

Use the table below to answer the following questions.
Table 17.2.1

In Table 17.2.1, which one of the proposals will have the greatest support?

A)Current income distribution
B)Proposal A
C)Proposal B
D)Proposal C
E)Proposal A or C

Question 48

All of the following statements regarding rational ignorance are true except

A)it results when the cost of information exceeds the expected benefit of acquiring the information.
B)it allows special interest groups to exert political influence.
C)combined with special interest groups, it yields inefficiency in the provision of public goods.
D)it leads to an efficient outcome.
E)it results in voters having little knowledge about issues that have little effect on their economic welfare.

Question 49

Minimum differentiation among the political parties suggests that

A)the parties will have few ideas in common on their platforms.
B)the parties will offer few ideas on minimizing the size and scope of government.
C)the platforms of the parties will tend to become similar as they try to appeal to a majority of voters.
D)the platforms of the parties will tend to become dissimilar as they try to appeal to a loyal majority of voters.
E)the platforms of the parties will tend to have few, if any, new ideas.

Question 50

Use the table below to answer the following questions.
Table 17.2.1

In Table 17.2.1, which of the proposals would be supported by political parties according to the principle of minimum differentiation?

A)Current income distribution
B)Proposal A
C)Proposal B
D)Proposal C
E)Proposal A or C

Question 51

Rational ignorance suggests that a voter should stop acquiring more information about an issue when

A)the marginal benefit from acquiring the information equals zero.
B)the total cost of acquiring the information is minimized.
C)the total benefit from acquiring the information is maximized.
D)the marginal cost of acquiring the information is equal to the marginal benefit derived from the information.
E)the marginal cost of acquiring the information is greater than zero.

Question 52

The idea that the platforms of the political parties will tend to become similar over time is

A)not a reflection of reality.
B)true in theory but not true in actuality.
C)called the principle of minimum differentiation.
D)called the principle of minimal political confrontation.
E)the result of intense lobbying pressure.

Question 53

Rational ignorance suggests that voters will

A)understand defence technology before voting for defence policy.
B)understand the auditing procedures of the Canada Revenue Agency before voting for tax reform.
C)understand the chemistry of the atmosphere before voting for a clean-air act.
D)vote without complete information on many issues.
E)vote based on their complete trust in politicians and bureaucrats.

Question 54

To attract a majority of voters, a political party will

A)aim its message at the most enthusiastic groups.
B)aim its message at a small but loyal following.
C)present a political package aimed at making the wealthier voters better off.
D)present a political package aimed at making a majority of voters better off.
E)respond strongest to the most vigorous lobbyists.

Question 55

Use the table below to answer the following questions.
Table 17.2.1

In Table 17.2.1, which one of the proposals will have the least support?

A)Current income distribution
B)Proposal A
C)Proposal B
D)Proposal C
E)Proposal A or C

Question 56

Public choice theory predicts that

A)voters are fully informed about the effects of policies.
B)voters are rationally ignorant.
C)governments make choices that achieve an efficient provision of public goods.
D)votes are based on reality, not perceptions.
E)votes are based on lobbyists' viewpoints.

Question 57

According to public choice theory, a voter will tend to be well informed if the issue in question

A)is complicated and difficult to understand.
B)affects everyone a little.
C)is of special interest to a small group to which the voter does not belong.
D)has a large direct effect on the voter.
E)is important even if it does not directly affect the voter.

Question 58

According to public choice theory, government failure occurs because

A)government officials do not listen to the pleading of special interest groups.
B)lobbyists write legislation.
C)government officials act in their own self-interest.
D)voters are fully informed about the effects of policies.
E)government cannot calculate the levels of externalities because there is no market for them.

Question 59

Rational ignorance suggests that

A)all voters are ignorant.
B)all voters will be ignorant on issues that are not of special interest to them.
C)all voters will pursue information about each issue before voting.
D)low voter turnout is due to a lack of understanding of the importance of the political platforms.
E)it is easier to aim at the median voter because it is a less costly strategy for the politicians.

Question 60

If all voters are well informed about national defence, the quantity of national defence provided by the government will be

A)greater than the efficient quantity.
B)less than the efficient quantity.
C)the least costly quantity.
D)the efficient quantity.
E)the quantity that maximizes the budget of the Department of National Defence.

Question 61

Which of the following achieves the efficient use of a common resource?

A)property rights, production quotas, and individual transferable quotas
B)property rights, individual transferable quotas, and subsidies
C)property rights, production quotas, and subsidies
D)individual transferable quotas and copyrights
E)production quotas, individual transferable quotas, and copyrights

Question 62

John receives a marginal benefit of $80 from one satellite.Nick receives a marginal benefit of $50 from one satellite.Christina receives a marginal benefit of $65 from one satellite.John, Nick, and Christina are the only people in the economy What is the economy's marginal social benefit from one satellite?

A)$30
B)$195
C)$15
D)$80
E)$65

Question 63

In the equilibrium for a common resource with no government regulation,

A)marginal social benefit is greater than marginal social cost.
B)marginal social benefit equals marginal social cost.
C)marginal social benefit is less than marginal cost.
D)marginal social benefit is greater than marginal cost.
E)marginal social benefit equals marginal cost.

Question 64

According to ________ theory, governments make choices that result in an ________ provision of public goods.This outcome occurs in ________.

A)public choice; efficient; political markets in which voters are rationally ignorant
B)social interest; efficient; a perfect political system in which voters are fully informed about the effects of policies
C)social interest; efficient; political markets in which voters are rationally ignorant
D)public choice; inefficient; a perfect political system in which voters are full informed about the effects of policies
E)social interest; inefficient; political markets in which voters are rationally ignorant

Question 65

Common resources are overused because

A)the marginal private benefit of operating a boat is the quantity of fish a boat can catch.
B)the social benefits outweigh the private benefits.
C)the marginal private benefit will always exceed the marginal social cost.
D)external costs are not considered.
E)social costs are controlled by production quotas.

Question 66

An individual transferable quota is a production limit that

A)has a price equal to marginal cost.
B)is assigned to every producer in the industry at a predetermined price.
C)is assigned to an individual who must transfer the quota to anyone the government assigns.
D)is assigned to an individual who is free to transfer the quota to someone else.
E)has a price equal to marginal benefit.

Question 67

The absence of incentives to prevent the overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably is referred to as

A)unsustainable production.
B)sustainable production.
C)the tragedy of the commons.
D)rational ignorance.
E)irrational production.

Question 68

The "tragedy of the commons" refers to

A)the inability of lower income groups to achieve a higher level of education.
B)the absence of incentives to prevent the overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably.
C)the acceptance of deplorable working conditions by those who lack the human capital to obtain a better job.
D)the tendency for bureaucrats to maximize their budget.
E)farmers who allow their livestock to overgraze their fields.

Question 69

Rational ignorance

A)results when the cost of acquiring information exceeds the benefit of acquiring the information.
B)allows special interest groups to exert political influence.
C)combined with special-interest groups can yield inefficient provision of public goods.
D)results in all of the above.
E)results in none of the above.

Question 70

One way to alleviate the tragedy of the commons is to

A)eliminate production quotas for using the common resource.
B)make the resource private property.
C)allow all individuals to use the common resource free of charge.
D)distribute common resources among those individuals who really need the resource free of charge.
E)set a price of $1 per unit of the common resource because it is an affordable price.

Question 71

Use the figure below to answer the following question.

Figure 17.2.2
Refer to Figure 17.2.2.The graph shows the marginal social benefit and marginal social cost of a garbage disposal system in a city of 1 million people.If voters are well informed about the costs and benefits of the garbage disposal system, the political equilibrium of garbage is

A)2.0 million tonnes a day.
B)1.5 million tonnes a day.
C)2.5 million tonnes a day.
D)4.0 million tonnes a day.
E)0 million tonnes a day.

Question 72

According to public choice theory, a voter will favour a candidate whose political program is

A)perceived by the voter to be in his self-interest.
B)best for the majority of the people.
C)closest to efficiency.
D)favoured by the median voter.
E)efficient.

Question 73

Sustainable production is

A)the rate of production that can be maintained indefinitely.
B)the production output with the lowest average total cost.
C)the production output where MC = ATC.
D)the rate of production that maximizes marginal private benefit.
E)the rate of production where MB = MC.

Question 74

Sharing downloaded music

A)has a free-rider problem that cannot be eliminated because once music is downloaded, it is nonexcludable.
B)has a free-rider problem that can be eliminated by charging people to download music.
C)is a private good.
D)does not have a free-rider problem.
E)is a common resource.

Question 75

The construction of the economy's marginal social benefit curve for a public good reflects the fact that

A)all the individuals can consume the same unit of the good.
B)the government can supply a public good at a lower cost than can a private supplier.
C)more than one supplier can provide the good.
D)the same unit of the good cannot be simultaneously shared by more than one person at a time.
E)demand for a public good is perfectly elastic.

Question 76

Use the information below to answer the following question.
Fact 17.2.1 Should Childhood Vaccines Be Mandatory?
While Canadian vaccination rates are high, the outbreaks of measles in five provinces during 2014 show that not everyone is getting them. There is no national policy making vaccinations mandatory, although Ontario, New Brunswick and Manitoba require public school students to show their immunization records to attend school.
Source: CBC Radio, April 15, 2014
Refer to Fact 17.2.1.Someone who doesn't get vaccinated against measles is a "free rider" because if everyone in a neighbourhood except one person gets vaccinated, then the unvaccinated person

A)defeats the principle of minimum differentiation.
B)benefits from the neighbours' vaccinations.
C)increases the risk of his neighbours getting measles.
D)changes the measles vaccination into a natural monopoly good.
E)changes the measles vaccination into a common resource.

Question 77

Use the figure below to answer the following question.

Figure 17.2.3
Refer to Figure 17.2.3.The graph provides information about a waste disposal system in a city of 1 million people.If the city installs the efficient capacity, then each person pays ________ in taxes.

A)$125
B)$62.50
C)$250
D)zero
E)$31.25

Question 78

A Canada Day fireworks display

A)does not have a free-rider problem.
B)has a free-rider problem that cannot be eliminated.
C)has a free-rider problem that can be eliminated by using taxes paid by area residents to finance the display.
D)is a private good.
E)is a natural monopoly good.

Question 79

Your city council is contemplating upgrading its traffic control system and the council believes that the bigger the computer it installs, the better job it can do.Elected officials want to install the scale of the system that will win the most votes.The city bureaucrats want to maximize the budget.Suppose that you are an economist and your job is to calculate the scale of the system that uses resources efficiently.Public choice theory predicts that the quantity chosen will result in ________.As an informed voter, you can attempt to influence the choice of the correct system by encouraging other voters to ________.

A)overprovision that maximizes the budget of the bureaucrats; vote only for officials that will provide the smaller efficient quantity
B)overprovision that maximizes the budget of the bureaucrats; increase their income elasticity of demand for the new traffic control system
C)the efficient quantity; decrease their income elasticity of demand for the new traffic control system
D)the efficient quantity; increase their income elasticity of demand for the new traffic control system
E)overprovision that minimizes the income elasticity of demand of bureaucrats; decrease their elasticity of demand for the new traffic control system

Question 80

Growing voter income can lead to the growth of the government sector because

A)public goods are income elastic.
B)public goods are income inelastic.
C)richer voters are more likely to be rationally ignorant.
D)richer voters do not care about overprovision of government goods.
E)as income increases, more public goods become private goods.