Deck 11: Public Goods and Common Resources

Question 1

Excludability is the property of a good whereby

A)one person's use diminishes other peoples' use.
B)a person can be prevented from using it.
C)a good is private,not public.
D)a good is public,not private.

Answer 1

B

Question 2

Private goods are both

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

Answer 2

C

Question 3

Consider a public road that anyone is allowed to drive on.If the road is often congested,the road would be considered a

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

Answer 3

C

Question 4

Goods that are not rival in consumption include both

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

Question 5

Advocates of antipoverty programs claim that fighting poverty

A)is best accomplished by charities.
B)is a public good.
C)is more efficiently accomplished by the market.
D)should not be attempted with tax dollars.

Question 6

Both public goods and common resources are

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

Question 7

If a road is congested,then use of that road by an additional person would lead to a

A)negative externality.
B)positive externality.
C)Pigovian externality.
D)free-rider problem with rush hour drivers stuck in traffic.

Question 8

Private decisions about consumption of common resources and production of public goods usually lead to an

A)efficient allocation of resources and external effects.
B)efficient allocation of resources and no external effects.
C)inefficient allocation of resources and external effects.
D)inefficient allocation of resources and no external effects.

Question 9

Consider a good for which the number of people who benefit from the good is large and the exclusion of any one those people is impossible.In this case,the market for this good will likely

A)be provided by a private firm rather than the government.
B)have a free-rider problem.
C)not exist.
D)be limited to a small number of units of production.

Question 10

In deciding whether a good is a public good,one must determine the

A)incomes of those who benefit from the good.
B)value of the external benefits that accrue to resource owners.
C)excludability of the good.
D)All of the above are correct.

Question 11

Which of the following is a disadvantage of government provision of a public good such as national defense?
(i)The government does not know the exact willingness of consumers to pay for the public good.
(ii)The free-rider problem is more likely to occur when the government provides a public good than when the private sector provides a public good.
(iii)Taxpayers do not agree on the optimal quantity of the public good that the government should provide.

A)(i)only
B)(i)and (ii)only
C)(i)and (iii)only
D)(i),(ii),and (iii)

Question 12

Because public goods are

A)excludable,people have an incentive to be free riders.
B)excludable,people do not have an incentive to be free riders.
C)not excludable,people have an incentive to be free riders.
D)not excludable,people do not have an incentive to be free riders.

Question 13

A free rider is a person who

A)will only purchase a product on sale.
B)receives the benefit of a good but avoids paying for it.
C)can produce a good at no cost.
D)rides public transit regularly.

Question 14

Suppose that everyone prefers to live in a society without poverty.Further suppose that some private charities are successful in reducing poverty.People who do not contribute to the charities

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

Question 15

For private goods allocated in markets,

A)prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.
B)prices guide the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources.
C)the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.
D)the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources.

Question 16

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 17

Under which of the following scenarios would a park be considered a public good?

A)Visitors to the park must pay an admittance fee,but there are always plenty of empty picnic tables.
B)Vistors to the park must pay an admittance fee and frequently all of the picnic tables are in use.
C)Visitors can enter the park free of charge and there are always plenty of empty picnic tables.
D)Visitors can enter the park free of charge,but frequently all of the picnic tables are in use.

Question 18

The provision of a public good generates a

A)positive externality,as does the use of a common resource.
B)positive externality and the use of a common resource generates a negative externality.
C)negative externality,as does the use of a common resource.
D)negative externality and the use of a common resource generates a positive externality.

Question 19

Knowledge is an example of a

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

Question 20

The difference between specific knowledge and general knowledge is that

A)the creation of general knowledge is usually more profitable for the creator.
B)specific knowledge is excludable,while general knowledge is not excludable.
C)general knowledge is excludable,while specific knowledge is not excludable.
D)general knowledge is rival in consumption,while specific knowledge is not rival in consumption.

Question 21

Neither public goods nor common resources are

A)excludable,but only public goods are not rival in consumption.
B)excludable,but only common resources are not rival in consumption.
C)rival in consumption,but only public goods are not excludable.
D)rival in consumption,but only common resources are not excludable.

Question 22

Which of the following is an example of government intervention to solve a Tragedy of the Commons problem?

A)subsidizing basic research
B)building lighthouses
C)toll charges on congested roads
D)cost-benefit analysis

Question 23

In a certain city,the government is considering acquiring some land and turning it into a park (without any fences or gates).In an attempt to determine the extent to which residents of the city would value the park,residents are asked to fill out a questionnaire.Which of the following is correct?

A)On the questionnaire,some residents are likely to exaggerate the value they associate with the park.
B)On the questionnaire,some residents are likely to exaggerate the costs they associate with the park.
C)The use of such a questionnaire in cost-benefit analysis is likely to produce only rough approximations of residents' perceptions of the costs and benefits of a park.
D)All of the above are correct.

Question 24

A toll on a congested road is in essence

A)an interstate highway tax.
B)a Department of Motor Vehicles tax.
C)a gasoline tax.
D)a corrective tax.

Question 25

Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to

A)overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good.
B)overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good.
C)understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good.
D)understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good.

Question 26

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway.Which of the following statements is correct?

A)The benefits are usually easier to measure than the costs.
B)Because human life is priceless,any measure to increase traffic safety would generate benefits that outweigh the costs.
C)Estimating the value of a human life is difficult but necessary in order to evaluate the proposal.
D)Both a and b are correct.

Question 27

Three business people meet for lunch at an Indian restaurant.They decide that each person will order an item off the menu,and they will share all dishes.They will split the cost of the final bill evenly among each of the people at the table.When the food is delivered to the table,each person faces incentives similar to the

A)consumption of a common resource good.
B)production of a public good.
C)consumption of a club good.
D)production of a private good.

Question 28

Which parable describes the problem of wild animals that are hunted to the point of extinction?

A)Coase theorem
B)Tragedy of the Commons
C)Cost-benefit analysis
D)Clean Air Act

Question 29

When an infinite value is placed on human life,policymakers who rely on cost-benefit analysis

A)are forced to pursue any project in which a single human life is saved.
B)are likely to make decisions that optimally allocate society's scarce resources.
C)would not pursue any public project that would not save human life.
D)would be forced to rely on private markets to provide public goods.

Question 30

Suppose that a small county is considering adding a guard rail to a dangerous curve by a river.The guard rail will cost 70,000 dinar.The average damage done to vehicles that slide off the road at the curve is 10,000 dinar.It is expected that the guard rail will prevent 5 vehicles from sliding off the road during its usable life.What should the county do?

A)Install the guard rail because safety is priceless.
B)Install the guard rail because the benefits exceed the costs.
C)Do not install the guard rail because the costs exceed the benefits.
D)Do not install the guard rail at any cost because drivers can purchase private insurance for their vehicles.

Question 31

Before considering any public project,the government should
(i)compare the total cost and total benefits of the project.
(ii)conduct a cost-benefit analysis.
(iii)infer that citizens who vote for a project are willing to pay equally for it.

A)(i)only
B)(ii)only
C)(i)and (ii)only
D)(i),(ii),and (iii)

Question 32

Which of the following is not a reason that the findings of cost-benefit analyses on public goods are only rough approximations?

A)Without prices,it is difficult to be sure how much people really value a good.
B)Analysts can't be sure that the respondents to surveys are telling the truth.
C)Analysis must include not only the cost of building the project but also the cost of maintenance,if any.
D)People value goods differently if they are publicly provided rather than privately provided.

Question 33

A tax on gasoline often reduces road congestion because gasoline

A)and driving are complements.
B)and driving are substitutes.
C)is a normal good,while driving is an inferior good.
D)is an inferior good,while driving is a normal good.

Question 34

If the government decides to build a new highway,the first step would be to conduct a study to determine the value of the project.The study is called a

A)fiscal analysis.
B)monetary analysis.
C)welfare analysis.
D)cost-benefit analysis.

Question 35

Economists think that the best way to determine the value of a human life is to

A)evaluate the value of a person's expected earnings in the labor market.
B)evaluate the risks people are willing to take and what they would have to be paid to take them.
C)determine a person's accumulated wealth at the time of death.
D)do nothing; human life is priceless.

Question 36

Using a toll to reduce traffic when congestion is greatest is an example of a

A)regulation solution.
B)command-and-control policy.
C)corrective tax.
D)Coase theorem solution.

Question 37

Which of the following quotations illustrates the Tragedy of the Commons?

A)"A bird in the hand is worth two in the bush."
B)"The only difference between the rich and other people is that the rich have more money."
C)"What is common to many is taken least care of,for all men have greater regard for what is their own than for what they possess in common with others."
D)"Anyone who is not a socialist before he is 30 has no heart; anyone who is still a socialist after he is 30 has no head."

Question 38

A town engineer comes to the city council with a proposal to install a traffic light at a certain intersection that currently has a stop sign.The benefit of the traffic light is increased safety because the light will reduce the incidence of fatal traffic accidents by 50 percent per year.Which of the following statements is correct?

A)The city council should vote to install the traffic light because the benefits will outweigh the costs.
B)The city council should carefully evaluate the benefits of reduced fatalities against only the explicit costs of the light.
C)The city council should carefully evaluate the benefits of reduced fatalities against the costs of the light and of the extra time that drivers will spend waiting for a green light.
D)The costs will invariably outweigh the benefits.

Question 39

Each of the following is likely to be a successful way for the government to solve the problem of overuse of a common resource except

A)regulating the use or consumption of the common resource.
B)taxing the use or consumption of the common resource.
C)selling the common resource to a private entity.
D)asking individuals to voluntarily reduce their use of the resource.

Question 40

Because elephants roam freely in many countries in Africa,each individual African elephant poacher has

A)a strong incentive to kill as many elephants as he can find.
B)a strong incentive to protect the elephants.
C)the ability to save the elephants.
D)None of the above is correct.

Question 41

A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the Atlantic waters south of Cape Cod based on a study of the lobster population.Which of the following statements is not correct?

A)Lobsters are rival but not excludable.
B)The lobster population is an example of the tragedy of the commons.
C)Reducing the quota on the number of lobsters any fisher can catch would have a protective effect on the lobster population.
D)If left unregulated,the lobster population will likely increase.

Question 42

A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.

Question 43

Advocates of antipoverty programs claim that fighting poverty is a public good.

Question 44

A free-rider is someone who receives the benefit of a good but avoids paying for it.

Question 45

Consider the following problems: overcrowded public highways,overfishing in the ocean,polluted air,and the near-extinction of the wild rhinoceros.What do these problems have in common?

A)Private markets could easily solve them if governments left the markets alone.
B)They would all go away if the government sponsored an intensive public-information campaign.
C)They are all the result of a failure to establish clear property rights over something of value.
D)They are all the result of a failure of corrective taxes.

Question 46

A textbook is a

A)private good and the knowledge that one gains from reading the book is a common resource.
B)private good and the knowledge that one gains from reading the book is a public good.
C)common resource and the knowledge that one gains from reading the book is a public good.
D)common resource and the knowledge that one gains from reading the book is a private good.

Question 47

National Public Radio would be considered a club good.

Question 48

Nine friends who love the beach decide to pool their financial resources and equally share the cost of a one-week house rental by the ocean.Suppose that the beach outside of the house becomes more congested when the nine additional people join the other beachgoers.Which of the following statements is not correct?

A)Use of the beach by the nine new beachgoers will yield a negative externality.
B)The town can reduce the congestion externality by raising the fee to access the beach.
C)An increase in the fee to access the beach could be viewed as a corrective tax on the externality of congestion.
D)Each of the nine friends would have been better off staying at home.

Question 49

One benefit of the patent system is that it encourages the production of technical knowledge.

Question 50

Even economists who advocate small government agree that national defense is a good that the government should provide.

Question 51

Which of the following statements is correct?

A)The establishment of property rights sometimes gives rise to market failure.
B)The absence of property rights sometimes gives rise to market failure.
C)In the context of public goods,the Coase theorem implies that total surplus in some markets can be improved by the elimination of property rights.
D)Government regulation of private behavior,in response to market failure,can never improve social well-being.

Question 52

Private markets usually provide lighthouses because ship captains have the incentive to navigate using the lighthouse and therefore will pay for the service.

Question 53

Which of the following statements is correct?

A)Common resources are nonexcludable and nonrival in consumption.
B)Uncongested toll roads are an example of the free rider problem.
C)When African elephants were privatized,the survival of the species improved.
D)Fish in the ocean are excludable but nonrival in consumption.

Question 54

Free goods are usually efficiently allocated without government intervention.

Question 55

Figure 11-1
Refer to Figure 11-1.The box labeled A represents

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

Question 56

Elephants are endangered,but cows are not because

A)cows are not as valuable as elephants.
B)elephants are a common resource,while cows are private goods.
C)cows are a common resource,while elephants are private goods.
D)it is legal to kill cows but not elephants.

Question 57

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

Question 58

A stairwell in a certain office building is always congested at 12:00 p.m.and 1:00 p.m.The congestion is so bad that people have been complaining to the building's owner.Which of the following methods would be the most efficient way of reducing congestion?

A)Assign each person in the building a time when they are allowed to use the stairwell.
B)Encourage people to voluntarily keep off the stairwell during peak times.
C)Charge everyone who uses the stairwell when it is congested the same fee.People who value the use of the stairs the most will be the ones who use the stairwell at peak times.
D)Hold a lottery to determine who wins the right to use the stairwell at peak times.

Question 59

When goods are available free of charge,the market forces that normally allocate resources in our economy are absent.

Question 60

Figure 11-1
Refer to Figure 11-1.The box labeled B represents

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

Question 61

Why do wild salmon populations face the threat of extinction while goldfish populations are in no such danger?

Question 62

The government often intervenes when private markets fail to provide an optimal level of certain goods and services.For example,the government imposes an excise tax on gasoline to account for the negative externality that drivers impose on one another.Why might the private market not reach the socially optimal level of traffic without the help of government?

Question 63

A study that compares the costs and benefits to society of providing a public good is called externality analysis.

Question 64

One possible solution to the problem of protecting a common resource is to convert that resource to a private good.

Question 65

The pollution market failure is an example of the free rider problem.

Question 66

Some advocates of antipoverty programs claim that fighting poverty is a public good.Describe why government intervention may be necessary to reduce poverty.

Question 67

Aristotle writes,"What is common to many is taken least care of,for all men have greater regard for what is their own than for what they possess in common with others." In this statement,Aristotle is referring to the free-rider problem that occurs when a person receives the benefit of a good without paying for it.

Question 68

The creation of knowledge is a public good.Because knowledge is a public good,profit-seeking firms tend to free-ride on the knowledge created by others and,as a result,devote too few resources to the creation of knowledge.How does the U.S.government correct for this apparent market failure?

Question 69

Markets may fail to allocate resources efficiently when property rights are not well established.

Question 70

Place each of the following in the correct location in the table.