Question 1

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.

Accepted Answer

Prices act as signals to both buyers and sellers about how the good is valued in the market. Buyers will only purchase the good if they believe the price is worth the satisfaction they will receive, while sellers will only produce and sell the good if they believe the price is high enough to cover their costs and make a profit. As a result, the market price will reflect the balance of supply and demand, and the allocation of resources will be efficient, meaning that society's overall welfare is maximized.

Question 2

Goods that are not excludable include both
A) private goods and public goods.
B) club goods and common resources.
C) common resources and public goods.
D) private goods and club goods.

Accepted Answer

Common resources and public goods are both goods that are non-excludable. Common resources, such as oceans and forests, are difficult to exclude others from using or depleting. Public goods, such as national defense and street lighting, are non-excludable because it is difficult to prevent non-payers from using them once they have been provided. Private goods and club goods are both excludable goods that can be confined to specific individuals or groups.

Question 3

The provision of public goods gives rise to
A) positive externalities, as does the use of common resources.
B) positive externalities, whereas the use of common resources gives rise to negative externalities.
C) negative externalities, whereas the use of common resources gives rise to positive externalities.
D) negative externalities, as does the use of common resources.

Accepted Answer

B

Question 4

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.

Accepted Answer

Excludability refers to the ability to prevent someone from using a good. In other words, it is possible to exclude someone from using the good. Choice A describes rivalry, which is the property of a good where one person's use diminishes other peoples' use. Choices C and D refer to the classification of goods as either private or public, which is a separate concept from excludability.

Question 5

The provision of public goods gives rise to
A) no externalities.
B) positive externalities.
C) negative externalities.
D) rivalries in consumption.

Accepted Answer

The provision of public goods gives rise to positive externalities because everyone in the society can benefit from the public good, even if they have not contributed to its provision. Also, the consumption of a public good by one person does not decrease its availability for others to use, which means that the good is non-rivalrous in consumption.

Question 6

Government policy can potentially raise economic well-being
A) in all markets for goods and services.
B) in economic models, but not in reality.
C) when a good does not have a price attached to it.
D) never.

Accepted Answer

The answer of Government policy can potentially raise economic well-being
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Question 7

When a good is excludable,
A) one person's use of the good diminishes another person's ability to use it.
B) people can be prevented from using the good.
C) no more than one person can use the good at the same time.
D) everyone will be excluded from using the good.

Accepted Answer

Excludability refers to the ability to prevent someone from using a good. If a good is excludable, it means that someone can be prevented from using it. Choice A refers to rivalrousness, which means that one person's use of the good diminishes another person's ability to use it. Choice C refers to excludability and rivalrousness, which is the definition of a private good. Choice D is not accurate as being excludable does not necessarily mean that everyone will be excluded from using the good.

Question 8

A good is excludable if
A) one person's use of the good diminishes another person's enjoyment of it.
B) the government can regulate its availability.
C) it is not a normal good.
D) people can be prevented from using it.

Accepted Answer

An excludable good is one that can be prevented from being used by people. This means that someone has the ability to deny access to the good, such as a toll road or a private beach.

Question 9

If people can be prevented from using a certain good,then that good is called
A) rival in consumption.
B) excludable.
C) a common resource.
D) a public good.

Accepted Answer

If people can be prevented from using a certain good, then that good is excludable. A rival in consumption good can be used by multiple people, but its availability decreases as the number of users increases. A common resource is not excludable, and a public good is non-excludable and non-rivalrous.

Question 10

Governments can improve market outcomes for
A) public goods but not common resources.
B) common resources but not public goods.
C) both public goods and common resources.
D) neither public goods nor common resources.

Accepted Answer

Governments can use various policy measures like taxation, subsidies, and regulation to address market failures and improve outcomes for both public goods (e.g. national defense, clean air) and common resources (e.g. fish stocks, forests) which are characterized by non-excludability and rivalry in consumption. By providing public goods directly or funding them, governments can ensure their provision and prevent the free-rider problem. Likewise, governments can use regulation and incentives to correct the overuse, degradation, and depletion of common resources caused by the tragedy of the commons, and promote sustainable use and conservation.

Question 11

Both public goods and common resources are
A) rival in consumption.
B) nonrival in consumption.
C) excludable.
D) nonexcludable.

Accepted Answer

The answer of Both public goods and common resources are
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Question 12

The idea that "externalities arise because something of value has no price attached to it" is associated with
A) public goods, but not with common resources.
B) common resources, but not with public goods.
C) both public goods and common resources.
D) neither public goods nor common resources.

Accepted Answer

Externalities can arise in both public goods and common resources. In public goods, such as clean air, there is no market price attached to them because they are non-excludable and non-rival in consumption. In common resources, such as clean water, there may be a market price, but it may not reflect the true social cost or benefit of the resource, leading to externalities. Therefore, both public goods and common resources can lead to externalities because of their lack or mispricing.

Question 13

Goods that are not excludable are usually
A) higher priced than excludable goods.
B) higher priced than rival goods.
C) in short supply.
D) free of charge.

Accepted Answer

Goods that are not excludable cannot be easily restricted to only those who pay for them, meaning that people who do not pay for them can still benefit from them. Therefore, these goods are often provided for free.

Question 14

For most goods in an economy,the signal that guides the decisions of buyers and sellers is
A) preference.
B) government intervention.
C) quantity.
D) price.

Accepted Answer

Price serves as the signal that guides the decisions of buyers and sellers in most goods in an economy. It represents the value of a good or service and helps to allocate resources efficiently. As prices rise, it signals to producers to increase production, while consumers may choose to reduce their consumption. Conversely, as prices fall, producers may choose to cut back on production, while consumers may choose to increase their consumption. This process helps to balance supply and demand and ensure that resources are allocated efficiently.

Question 15

The old lyric "the best things in life are free"
A) is not true for any goods.
B) is even true for some goods that have a price.
C) refers to goods provided by nature or the government.
D) refers to goods provided by the market.

Accepted Answer

The answer of The old lyric "the best things in...

Question 16

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.

Accepted Answer

The provision of a public good, such as a park or a clean environment, benefits everyone, even those who don't directly pay for it, creating a positive externality. Conversely, the use of a common resource, like overfishing in a public lake, can deplete or degrade that resource, leading to negative externalities for the community.

Question 17

When goods do not have a price,which of the following primarily ensures that the good is produced?
A) buyers
B) sellers
C) government
D) the market

Accepted Answer

If a good doesn't have a price, there is no market incentive for producers to produce it, and there are no buyers to create demand. In this case, the government can step in and provide subsidies or incentives for the production of the good.

Question 18

Both private goods and club goods are
A) rival in consumption.
B) nonrival in consumption.
C) excludable.
D) nonexcludable.

Accepted Answer

The answer of Both private goods and club goods are
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Question 19

Goods that are excludable include both
A) club goods and public goods.
B) public goods and common resources.
C) common resources and private goods.
D) private goods and club goods.

Accepted Answer

Private goods and club goods are both excludable. Private goods are goods that only one person can consume at a time, and can be easily excluded from consumption by others (e.g. a meal at a restaurant). Club goods are goods that can be consumed by multiple individuals, but access can be limited and controlled (e.g. a private park for members only).

Question 20

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.

Accepted Answer

Private decisions about consumption of common resources (such as air or water) often lead to overuse and depletion of the resource. Similarly, private decisions about production of public goods (such as parks or education) often result in underproduction because the producer cannot capture all the benefits of the good. These market failures lead to an inefficient allocation of resources. Additionally, there are often external effects (such as pollution or spillover benefits) that are not taken into account by private decision-makers, further exacerbating the inefficiencies.

Quiz 11: Public Goods and Common Resources.

For private goods allocated in markets,

Goods that are not excludable include both

The provision of public goods gives rise to

Excludability is the property of a good whereby

The provision of public goods gives rise to

Government policy can potentially raise economic well-being

When a good is excludable,

A good is excludable if

If people can be prevented from using a certain good,then that good is called

Governments can improve market outcomes for

Both public goods and common resources are

The idea that "externalities arise because something of value has no price attached to it" is associated with

Goods that are not excludable are usually

For most goods in an economy,the signal that guides the decisions of buyers and sellers is

The old lyric "the best things in life are free"

The provision of a public good generates a

When goods do not have a price,which of the following primarily ensures that the good is produced?

Both private goods and club goods are

Goods that are excludable include both

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