Deck 5: Public Goods

Question 1

A highway is a public good _____.

A)if it is free
B)if it is publicly run
C)if it is uncongested
D)if drivers cannot be excluded from driving on it

Answer 1

C

Question 2

Which of the following is not an argument for private sector production of collective consumption goods?

A)The good might only be a collective consumption good because of current government production.
B)Private sector production provides information about consumer preferences about the good.
C)The private sector has lower pay scales then government,lowering overhead costs.
D)Taxes used to finance government production produce deadweight losses.

Answer 2

C

Question 3

Public goods have at least one of two characteristics.What are the two characteristics?

A)collective consumption;nonexcludability
B)individual consumption;nonexcludability
C)collective consumption;excludability
D)individual consumption;excludability

Answer 3

A

Question 4

The optimal output of a collective consumption good is found by_____.

A)equaling marginal cost and the vertical summation of all individual's demand curves
B)equaling price and marginal cost
C)equaling marginal cost and the horizontal summation of all individual's demand curves
D)equaling marginal cost and long-run average total cost

Question 5

When a collective consumption good become congested _____.

A)nothing happens
B)it moves closer towards being a purely private good
C)free riding becomes more of a problem
D)exclusion becomes impossible

Question 6

Lindahl prices for collective consumption goods are _____.

A)are sufficient to achieve political agreement on the optimal level of output
B)are necessary to achieve political agreement on the optimal level of output
C)are sufficient for economic efficiency
D)are necessary for economic efficiency

Question 7

For a collective consumption good,market demand is found by ______.

A)horizontally summing individual demand curves
B)vertically summing individual demand curves
C)estimating a market demand function based on survey data
D)estimating a market demand function based on data from similar goods having market pricing

Question 8

Which of the following is not true of Lindahl prices for collective consumption goods?

A)Lindahl pricing might be useful in achieving political agreement on the proper amount of the public good to be produced.
B)Lindahl prices are set so the marginal benefit they receive from the public good is equal to the marginal cost.
C)Lindahl prices are difficult to calculate in practice.
D)Lindahl prices are necessary for economic efficiency.

Question 9

If government decides to produce a collective consumption good,taxes have to be levied to finance the production.In evaluating government provision then,the benefits of public production have to be _____.

A)high
B)weighed against the excess burden of taxation
C)positive
D)weighted against the tax incidence on poor families

Question 10

The primary advantage of Lindahl pricing is _____.

A)that it is easy to calculate
B)that at the price charged,every individual prefers a unique efficient level of output,increasing diversity in how the public good is provided
C)that is necessary for economic efficiency
D)that at the price charged,every individual prefers the same efficient level of output,making it more likely that the politically agreed upon output level is identical to the efficient output level

Question 11

The inefficiency for collective consumption goods stems from the fact that _____.

A)the total cost of the good is too high
B)the marginal cost of the good is zero
C)the total cost of the good is zero
D)the good cannot be priced because it is too easy to steal

Question 12

Collective consumption goods are _____.

A)goods that can be consumed by additional consumers without reducing the amount available to existing consumers
B)goods that can be produced for everyone at zero marginal cost
C)goods that are produced and consumed by an entire group,such as a commune that raises its own vegetables
D)goods that once produced,can be consumed by additional consumers without reducing the amount available to existing consumers

Question 13

Since collective consumption goods have a marginal cost of zero,the efficient price is equal to _____.

A)average fixed cost
B)average variable cost
C)marginal cost
D)the market price

Question 14

Sometimes what we think is a collective consumption good only has those characteristics because of _____.

A)high fixed costs.
B)private production
C)economies of scale
D)government production

Question 15

Which of the following collective consumption goods does not become a private consumption good at some level of use?

A)highway
B)swimming pool
C)national defense
D)television

Question 16

once produced,Nonexcludable goods are _____.

A)difficult to keep employees from stealing
B)difficult to keep people from consuming without paying for them
C)difficult to keep people from consuming at any price
D)available to anyone if they want to pay for it

Question 17

One benefit to private sector production of a collective consumption good is _____.

A)it overcomes the free riding problem
B)private producers can often bundle the good with something else people value
C)profits from private companies can be taxed
D)provides information valuable in allocating future resources

Question 18

Which of the following statements about the private production of a public good is true?

A)Private production is not feasible unless government subsidizes it.
B)Private production is only possible for pure public goods.
C)Private production is always inefficient.
D)Private production is provides useful information about consumer preferences.

Question 19

A public highway looks like a collective consumption good because there is very little traffic on it and zero congestion.Hence the marginal cost of an additional car is zero.Which of the following statements best describes why we should not assume that the road would always be a collective consumption good?

A)The lack of congestion could be the result of government overproduction.
B)The lack of congestion could be because of its low speed limit.
C)The lack of congestion could be because of excessive police ticketing.
D)The lack of congestion is because of the lower cost of alternative means of travel.

Question 20

A collective consumption good may be inefficiently produced by the private sector because _____.

A)it is inefficient to raise price above marginal cost
B)of free riding problems
C)fixed costs are too high
D)private producers are greedy

Question 21

A pure private good is _____ and _____.

A)nonexcludable;private in consumption
B)excludable;private in consumption
C)excludable;collective in consumption
D)nonexcludable;collective in consumption

Question 22

It is inefficient to charge a positive price for a collective consumption good.

Question 23

Which of the following is not a potential drawback to public provision of public goods?

A)Public provision lacks clear signals about the value of the good being produced,possibly leading to under and over provision of the goods.
B)Many collective consumption goods might be overproduced private goods.
C)Public provision often implies taxation,which creates an excess burden that might overwhelm any efficiency gains.
D)Many collective consumption goods are really impure private goods and thus the efficient level of output is never reached.

Question 24

Goods that are either collective consumption goods or nonexcludable goods or both combined cannot be produced by the market.

Question 25

For an impure consumption good the maximum output is determined where_____.

A)price equals marginal cost
B)marginal cost equals the vertical summation of all individual demand curves
C)price equals long run average total cost
D)marginal cost equals the horizontal summation of all individual demand curves

Question 26

Public goods have to be produced by the public sector.

Question 27

Collective consumption goods can lose their collective consumption characteristics as they get more crowded.

Question 28

A pure public good is _____ and _____.

A)nonexcludable;private in consumption
B)excludable;private in consumption
C)excludable;collective in consumption
D)nonexcludable;collective in consumption

Question 29

If government decides not to charge for access to a highly demanded highway,which of the following is most likely to happen?

A)Government will keep capacity the same.
B)Government increase capacity to reduce congestion.
C)Government will encourage telecommuting.
D)Government will produce an inefficient level of highways to maximize social welfare.

Question 30

Nonexcludability generates a problem because individuals have an incentive to_____.

A)free ride
B)profit
C)fight
D)steal

Question 31

Which of the following is not an impure public good?

A)a full movie theatre
B)a fairly congested highway
C)a swimming pool at ninety percent capacity
D)the average major league baseball game in early April

Question 32

Nonexcludability is a matter of degree.As the cost of excluding individuals rises,_____.

A)the marginal cost of provision increase
B)the marginal cost of provision decreases
C)the probability of free riding declines
D)the probability of free riding increases

Question 33

For public goods,in general,the optimal output level is found where the marginal benefits of additional production equal marginal cost.

Question 34

A nonexcludable good _____.

A)is by definition also a collective consumption good
B)usually suffers from the free rider problem
C)will always lead to overproduction
D)is frequently illegal

Question 35

Because private firms cannot make money pricing at marginal cost for collective consumption goods,government must produce collective consumption goods for them to exist.

Question 36

Which of the following is not an impure public good?

A)A fairly congested interstate highway.
B)A crowded swimming pool.
C)A movie theatre nearing capacity.
D)A highly demanded piece of computer software.

Question 37

A prisoner's dilemma problem can be solved by _____.

A)the parties are kept from communicating with each other.
B)a third party enforced their cooperation
C)the parties were not guilty of the crime
D)giving the parties sufficient time to arrive at the social beneficial decision

Question 38

The result of a prisoner's dilemma is _____.

A)individuals pursuing their own interests are acting for the group interest
B)individuals pursuing the group interest are acting against their own interests
C)individuals pursuing their own interests are acting against the group interest
D)individuals pursuing the group interest are acting for their own interest

Question 39

Determination of a public good depends only upon the technical characteristics of the good.

Question 40

In order to be a public good a good must be both a collective consumption good and be nonexcludable.

Question 41

Lindahl pricing is not necessary for economic efficiency.

Question 42

Define a collective consumption good and why private production of collective consumption goods will be inefficient and might justify government intervention.

Question 43

A mostly filled movie theatre is an impure public good.

Question 44

Most public goods produced by government are nonexcludable because the costs of exclusion are too high.

Question 45

Microcomputer software is a pure public good.

Question 46

Define Lindahl prices.Why are Lindahl prices not a necessary condition for the production of the efficient level of output for a collective consumption good? What then is the main benefit of Lindahl pricing?

Question 47

The question of whether the public or the private sector is appropriate to provide public goods must be decided on a case by case basis.

Question 48

Consider the problem of providing a collective consumption good in a three individual world.Draw a graph showing each individual's demand curve as well as the market demand curve for the collective consumption good.Show and describe how the optimal output of a collective consumption good is determined.

Question 49

Cable television is a collective consumption good.Define a collective consumption good and,in with respect to cable television,explain why the private sector will produce an inefficient level of cable television.

Question 50

Explain how a private consumption good can be transformed into a collective consumption good,if possible.Does this help our understanding of collective consumption goods and whether they should be produced by public or private means? If so,how?