Question 1

Radio programs serve as an example of a public good that is provided efficiently by economic markets.

Accepted Answer

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Question 2

Thanks to advertising, the efficient price for public radio service is zero.

Accepted Answer

Advertising revenue can offset the need for listener donations, making the service free for listeners.

Question 3

A solution to the tragedy of the commons is to convert common resources to private goods.

Accepted Answer

By converting common resources to private goods, individuals have ownership and therefore a greater incentive to protect and conserve the resource. This reduces the risk of overuse and depletion that occurs with common resource ownership.

Question 4

Some animals are going extinct because of a lack of property rights over these animals.

Accepted Answer

Without clearly defined property rights, there is no incentive for individuals to conserve and protect animals. In fact, it may be more financially beneficial for them to hunt or exploit these animals before they disappear. This is why some animals are going extinct or in danger of extinction.

Question 5

A free rider enjoys the benefits of a private good without paying a share of the costs.

Accepted Answer

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Question 6

Google is an example of a potential "club good" that is free because of advertising.

Accepted Answer

Google is a potential "club good" because it is non-rivalrous (multiple people can use it at the same time without diminishing its usefulness) and excludable (it is possible to limit who has access to it). However, it is free because of advertising, meaning that users do not have to pay to use it but instead are shown advertisements that generate revenue for Google.

Question 7

The tragedy of the commons problem is a type of negative externality.

Accepted Answer

The tragedy of the commons problem occurs when individuals use a shared resource without considering the cost to others, leading to depletion or degradation of the resource. This is a form of negative externality because the costs of an individual's actions are not fully born by that individual, but by others who share the resource.

Question 8

A public good is a good produced in the public sector.

Accepted Answer

A public good is a good that is non-excludable and non-rivalrous in consumption and can be produced in both the public and private sectors.

Question 9

Advertising is an efficient solution to the problem of nonexcludability and nonrivalry.

Accepted Answer

Advertising can help address the issue of nonexcludability by targeting specific groups of consumers and communicating to them the benefits of a particular product or service. It can also increase demand and create a rivalry among consumers for the product, making it less nonrival. Therefore, advertising can be an efficient solution to the problem of nonexcludability and nonrivalry.

Question 10

A fisherman has an incentive to overfish because catching less fish today doesn't increase the number of fish he can catch in the future.

Accepted Answer

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Question 11

HBO shows are not considered club goods.

Accepted Answer

HBO shows are usually only accessible to those who subscribe to the HBO channel or streaming service, making them a type of exclusive or club good that is not widely available to everyone.

Question 12

When public goods are funded through advertising, the problems of both free and forced riders can be mitigated.

Accepted Answer

Advertising allows for the costs of the public good to be spread out among a larger group of individuals, reducing the burden on any one person. Additionally, since individuals who consume the public good are more likely to be exposed to the advertising, the issue of free riding is lessened.

Question 13

Entrepreneurs are constantly looking for ways to turn nonexcludable, nonrival goods, such as television, into club goods.

Accepted Answer

This statement is true. Entrepreneurs may look for ways to add exclusivity or membership benefits to nonexcludable, nonrival goods to turn them into club goods and generate revenue. For example, offering premium content or access to special features for paid subscribers on a television streaming platform.

Question 14

Theoretically, when property rights are difficult to establish, multi-country agreements could help to solve the tragedy of the commons, but it has not been possible to establish any such agreement to date.

Accepted Answer

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Question 15

Club goods are goods that are excludable but nonrival.

Accepted Answer

Club goods are limited to members who pay a fee or meet certain requirements to access them, making them excludable. However, multiple members can use the same good at the same time without diminishing its quality or quantity, making them nonrival. Examples of club goods include private parks, country clubs, and satellite TV subscriptions.

Question 16

The invisible hand guides the production of optimal quantities of public goods, just as it does for private goods.

Accepted Answer

The production of public goods is not guided by the invisible hand of the market, as there is no clear way to assign property rights or exclude individuals from consuming the good. Therefore, government intervention is often necessary to provide or regulate the production of public goods.

Question 17

Advertising is a way for club goods to be given away free.

Accepted Answer

Club goods are goods that are non-rival and excludable, such as music streaming services or private beaches. Since they are non-rival, more people using the good does not decrease its availability for others. However, they are excludable, meaning that people can be prevented from using the good if they do not pay for it. By advertising and promoting the good, more people may become aware and willing to pay for it, allowing the club good to be given away for free to its current members.

Question 18

Tuna are not public goods since they are nonrival but excludable.

Accepted Answer

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Question 19

The use of advertising makes it possible for the market to produce some public goods.

Accepted Answer

Advertising can inform people about public goods and encourage them to contribute to their production. For example, advertisements for blood donations or organ donation can increase the supply of these public goods.

Question 20

A solution to the tragedy of the commons is to convert common resources to public goods.

Accepted Answer

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Quiz 19: Public Goods and the Tragedy of the Commons