Deck 3: Property Rights and Economic Efficiency

Question 1

The common pool problem refers to _____.

A)the fact that nobody has an incentive to consider the costs their actions impose on others
B)poorly defined property rights encourage people to join groups to oversee resources
C)the fact that a small number of participants can create high transactions costs
D)the fact that a large number of participants can create low transactions costs

Answer 1

A

Question 2

The Coase Theorem states that _____.

A)in the absence of transactions costs,the allocation of resource will be independent of property right assignment
B)in the absence of transactions costs,the allocation of resources will be dependent on property right assignment
C)with transactions costs,the allocation of resources will be independent of property right assignment
D)with transactions costs,the allocation of resources will be dependent of property right assignment

Answer 2

A

Question 3

Poorly defined property rights imply that _____.

A)people can play their music as loud as they would like
B)profit opportunities exist for entrepreneurs
C)a Pareto optimum is still easily achieved
D)people may be able to use resources without paying for them

Answer 3

D

Question 4

The key to reaching a Pareto optimum through mutually beneficial exchange _____.

A)is to remove barriers to international trade
B)is to establish property rights for valuable resources
C)is to provide start-up capital to fledgling entrepreneurs
D)is to encourage people to use online auction services

Question 5

The Coase theorem applies to cases where _____.

A)transactions costs are high
B)transactions costs are obvious
C)transactions costs are zero
D)transactions costs are difficult to figure out

Question 6

When property rights are poorly-defined,a setting with large numbers of people suggests _____

A)an intractable problem
B)high transactions costs
C)low transactions costs
D)an active role for government
E)both b and c

Question 7

Coase made famous a court case between a doctor and a confectioner.Suppose that exact case happened again and transactions costs were absent.When would we be sure that resources were inefficiently allocated?

A)If the confectioner wins the property right to make his confections.
B)If the doctor wins the right to prevent the confectioner from making his confections.
C)Zoning laws are changed to prevent the confectioner from manufacturing in the current location.
D)The judge forces the parties to bargain until they reach an agreement on who has a right to do what.

Question 8

One reason why African elephants are endangered is _____.

A)the low cost of hunting exhibitions
B)exploitation by zoo owners
C)many natural predators
D)governments often prohibit private ownership

Question 9

The Coase Theorem does not imply which of the following?

A)Resources will be allocated efficiently in the absence of transactions costs.
B)Resources will move to their highest valued use in there are no transactions costs.
C)The initial allocation of property rights does not matter to the parties involved.
D)The allocation of resources is independent of the assignment of property rights if transactions costs are zero.

Question 10

Property rights often remain poorly defined because of _____.

A)difficulty enforcing ownership once defined
B)government fiat
C)strong incentives towards the status quo
D)monopolies

Question 11

Which of the following statements best summarizes why buffalo almost became extinct during the 1800s?

A)Hunters from the East refused to respect the buffalo as the American Indians did.
B)Demand for buffalo meat was high in Eastern markets.
C)No one owned a buffalo until it was killed.
D)Buffalo do not run away upon hearing rifle shots.

Question 12

A property right _____.

A)entails responsibility
B)means you can burn trash in your yard whenever you want
C)is absolute
D)is completely different than the right to free speech

Question 13

Which of the following is not a problem with poorly defined property rights?

A)Insufficient incentive exists to produce resources that cannot be protected.
B)Resources will tend to be underutilized.
C)Individuals may be able to use resources without paying for them.
D)Little incentive to conserve on the use of poorly defined resources.

Question 14

A property right _____.

A)gives the owner the right to do whatever she pleases with the property
B)applies to homes and cars,but not to other types of property
C)does not free an individual from related obligations
D)is limited by a person's ability to protect it from predators

Question 15

The Coase Theorem implies that _____.

A)absent transactions costs,resources will be efficiently allocated
B)absent transactions costs,resources will be inefficiently allocated
C)with significant transactions costs,resources will be efficiently allocated
D)with significant transactions costs,resources will be inefficiently allocated

Question 16

The Coase Theorem implies that when there are no costs to trading,_____.

A)resources will move to their most valued uses,depending upon who gets the initial property rights
B)resources will move to their most valued uses,regardless of who gets the initial property rights
C)resources might be misallocated,depending upon the who gets the initial property rights
D)resources might be misallocated,regardless of who gets the initial property rights

Question 17

There are likely to be low transactions costs when _____.

A)property rights are not well-defined
B)property rights are well-defined
C)there are large numbers of people involved
D)there are small numbers of people involved

Question 18

If transactions costs are high and the number of individuals involved is large,then the assignment of property rights _____.

A)will eventually lower transactions costs
B)will overcome the free rider problems
C)matters for economic efficiency
D)does not matter to the participants

Question 19

In Coase's case of the doctor and the confectioner,who or what caused the negative situation?

A)The doctor,for moving his office so close to the confectioner that vibrations become a problem.
B)The confectioner,for creating the noise pollution.
C)Zoning laws.
D)Poorly defined property rights.

Question 20

In the context of the Coase theorem,the reciprocal nature of the problem is the fact that _____.

A)property rights are poorly defined for both parties
B)both parties are involved in a dispute
C)both parties are responsible for the problem
D)one party needs to give something up in order for the dispute to be resolved

Question 21

Oil is discovered under a nature preserve owned by the Audubon Society.Private ownership provides a strong incentive for even staunch naturalists to contract with oil companies to safely extract the oil.

Question 22

If clearly defined property rights did not exist,there would be no incentive for trade or produce more than could be protected by theft.

Question 23

If transactions costs are high and the number of individuals involved is large,initial assignment of property rights is important to economic efficiency.

Question 24

Zoning laws _____.

A)are the reason why Houston,Texas is indistinguishable from other major cities
B)are necessary for orderly,efficient land use
C)guarantee that two parcels of land next to each other will be compatible
D)are used by governments to create more desirable communities

Question 25

Government managers of natural resources only have the public benefit in mind when making decisions regarding the natural resources under their control.

Question 26

Which of the following statements is not true about zoning laws?

A)There are no zoning laws in Houston,Texas.
B)The first zoning laws were passed in New York City.
C)They are necessary for efficient land use.
D)Zoning proscribes certain land use patterns.

Question 27

According to the Coase Theorem,if there are no transactions costs it does not matter who gets the initial property right from the standpoint of economic efficiency because the person who values it highest will come along and take it.

Question 28

Entitlements _____.

A)give some individuals a command over the economic resources of others
B)do not require others to take action
C)are analogous to property rights
D)have not expanded during the twentieth century

Question 29

According to the Coase Theorem,if there are no transactions costs it does not matter to the individuals involved who gets the initial property right.

Question 30

Property rights have to be predefined or go through litigation in order to go to those who value them the highest.

Question 31

Efficient land use can only be achieved through zoning laws.

Question 32

Which of the following is not a way to solve the common pool problem?

A)Dividing up the resource evenly among all individuals using the common pool.
B)Giving the resource to one individual.
C)Letting resource owners work out a solution naturally.
D)Creating an agreement among resource users regulating use of the resource and sanctions for violators of the agreement.

Question 33

Government ownership of resources _____.

A)is the same as private ownership
B)is different than private ownership because government allocates resources based on the public interest
C)is different than private ownership because government allocates resources based on politics
D)is different than private ownership because government allocates resources based on efficiency

Question 34

Government ownership of natural resources saves those resources forever.

Question 35

Government managers _____.

A)care only about the public interest
B)have an incentive to consider their private benefits and costs
C)can use firm valuation to gauge performance
D)have an incentive to maximize profits

Question 36

Communally owned farms in centrally planned economies such as the former Soviet Union _____.

A)were equally productive as privately owned farms in the United States
B)were more productive as privately owned farms in the United States
C)were less productive than privately owned farms in the United States
D)are impossible to compare to privately owned farms in the United States because of data limitations

Question 37

In a city with as much zoning as Houston,restrictive covenants are rarely needed.

Question 38

Which of the following statements about restrictive covenants are true?

A)Restrictive covenants do not work in preventing incompatible uses of property.
B)There are not enough restrictive covenants to cover all eventualities.
C)Restrictive covenants can be used instead of zoning laws.
D)Restrictive covenants fail to produce results similar to zoning.

Question 39

Which of the following would not be an example of a common pool problem?

A)Oil reserves located under several separately owned parcels of land.
B)Buffalo nearly becoming extinct during the 1800s in the United States.
C)Rhino being poached for their horn in many African countries.
D)The grass is dying from overuse at a local dog park created by a local nonprofit.

Question 40

When common pools are placed under government ownership,their use will be dictated by the _____.

A)costs and benefits of a proposed use
B)amount of political pressure brought by competing factions
C)social welfare function
D)professional economists employed by the agency overseeing the resource

Question 41

The Coase Theorem implies that transactions costs are important in whether or not the initial assignment of property rights matters for economic efficiency.Describe what is meant by transactions costs and how transactions costs tend to vary as the size of groups increase.

Question 42

What is an entitlement? Specifically discuss how it might be different than a property right,properly understood.Using your definition,discuss how the right to bear arms and the right to an education might be different.

Question 43

Are zoning laws necessary to achieve separate residential and industrial neighborhoods? Why or why not? Provide a historical example that gives credence to your answer.

Question 44

What is the common pool problem? Provide some examples.

Question 45

The bureaucrat in charge of managing a state park is contemplating whether or not to ban snowmobiles from the park.What sort of factors is she likely to weigh when making her decision? How might those factors differ if she was the park manager for a private corporation?

Question 46

Twenty-first century land use planning has been increasingly focused on economic efficiency.

Question 47

Define property rights.Give an example of a property right in action.Are property rights absolute? If they are situations where they are not,using your previous example,give a situation where that property right might not be absolute.