Question 1

In economics, a negotiator who hopes to get an unusually large amount of money for land by refusing to come to terms is called a(n)
A) entrepreneur.
B) lobbyist.
C) holdout.
D) socialist.

Accepted Answer

A holdout in economics refers to an individual or entity that refuses to agree to a deal or sell property, often in hopes of securing a more favorable term or higher payment, particularly in situations involving collective agreements or eminent domain.

Question 2

For which of the following projects would it likely be most difficult to acquire 1,000 acres of land?
A) growing wheat
B) building an amusement park
C) building storage sheds
D) digging wells

Accepted Answer

Building an amusement park would likely be the most difficult project for which to acquire 1,000 acres of land due to the specific location requirements (accessibility, proximity to population centers, zoning regulations) and the need for a large, contiguous piece of land.

Question 3

For which of the following projects would it likely be least difficult to acquire 1,000 acres of land?
A) growing radishes
B) constructing a baseball stadium
C) building a private airport
D) digging a lake

Accepted Answer

Growing radishes would likely be the least difficult project for acquiring 1,000 acres of land because it requires less infrastructure and regulatory approval compared to constructing a baseball stadium, building a private airport, or digging a lake.

Question 4

Providing a good would likely be most difficult when the project involves assembling
A) a few parcels of contiguous land.
B) a few parcels of noncontiguous land.
C) many parcels of contiguous land.
D) many parcels of noncontiguous land.

Accepted Answer

The answer of Providing a good would likely be most...

Question 5

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. How much would Mariana expect to pay each landowner for his or her land?
A) $200,000
B) $400,000
C) $600,000
D) $3 million

Accepted Answer

Mariana expects to pay a total of $2 million for the land needed from the 5 ranchers. Therefore, she would expect to pay each landowner $2 million / 5 = $400,000.

Question 6

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose Mariana purchases the needed land from Abe, Ben, Cat, and Don for the value she calculated the land to be worth, but Eva refuses to sell the land for the same price as the other 4 ranchers. Economists wold refer to Eva as a
A) miser.
B) negative externality.
C) deadweight loss.
D) holdout.

Accepted Answer

Eva is referred to as a "holdout" because she refuses to sell her land at the price agreed upon by the other ranchers, potentially delaying or complicating Mariana's project.

Question 7

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose Mariana purchases the needed land from Abe, Ben, Cat, and Don for the value she calculated the land to be worth, but Eva refuses to sell the land for the same price as the other 4 ranchers. What is the maximum amount Mariana would be willing to pay Eva for her land and still be willing to build the railway?
A) $400,000
B) $1 million
C) $1.4 million
D) $3 million

Accepted Answer

Mariana has budgeted $3 million for land. If she purchases the needed land from Abe, Ben, Cat, and Don for a total of $2 million, she has $1 million left. However, since she needs to buy land from all 5 ranchers equally and has already allocated $2 million for 4 ranchers, the maximum she would be willing to pay Eva to not exceed her total budget of $3 million and still proceed with the project is an additional $1 million, making the total land cost $3 million. The question, however, is asking for the maximum she would be willing to pay Eva and still be willing to build the railway, not how much she has left. Since she calculated the land to be worth $2 million for all 5 ranchers equally, that means each portion is worth $400,000. If she has already spent $2 million, she has $1 million left from her budget for land. To not exceed her overall budget and considering she values the land from each rancher equally ($400,000 each), she could theoretically offer Eva up to $1.4 million ($400,000 for the expected cost plus the $1 million she has left) to still proceed with the project. This is because the question implies she's willing to use all her remaining budget to secure Eva's land if necessary, not just what's left after the expected expenditure.

Question 8

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that Mariana has $3 million to spend on their land and they also know that their land that Mariana needs is worth a total of $2 million. If all five ranchers got together and decided to sell the land to Mariana, what is the maximum amount that each rancher should ask to be paid for his or her land?
A) $400,000
B) $600,000
C) $750,000
D) $1 million

Accepted Answer

If the ranchers know Mariana has $3 million to spend, they can collectively ask for up to that amount. Dividing $3 million equally among the 5 ranchers gives each rancher $600,000.

Question 9

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million. If each rancher agrees to sell his or her parcel of land to Mariana for $500,000, Mariana will purchase
A) all five parcels of land and the railway will be built.
B) all five parcels of land but the railway will not be built.
C) only four parcels of land and the railway will be built.
D) no parcels of land and the railway will not be built.

Accepted Answer

Mariana has $3 million to buy the land, and each rancher is willing to sell their parcel for $500,000. Since 5 parcels at $500,000 each total $2.5 million, Mariana can afford to purchase all five parcels, allowing the railway to be built.

Question 10

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million. If each rancher agrees to sell his or her parcel of land to Mariana for $500,000, the economic pie will
A) grow by $500,000.
B) grow by $1 million.
C) grow by $2 million.
D) shrink by $500,000.

Accepted Answer

The economic pie will grow by $1 million because Mariana will save $1 million on the land purchase.

Question 11

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million. If each rancher agrees to sell his or her parcel of land to Mariana for $500,000, the logical outcome in this situation is for the railway ________ , and the benevolent social planner is ________.
A) to be built; pleased
B) to be built; indifferent
C) not to be built; unhappy
D) not to be built; indifferent

Accepted Answer

The railway should be built because Mariana will make a profit of $1 million ($3 million - $2 million). The benevolent social planner should be pleased because the railway will benefit the community by providing a new transportation option.

Question 12

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million. If each rancher agrees to sell his or her parcel of land to Mariana for $600,000, Mariana will purchase
A) all five parcels of land and the railway will be built.
B) all five parcels of land but the railway will not be built.
C) only four parcels of land and the railway will be built.
D) no parcels of land and the railway will not be built.

Accepted Answer

Mariana has $3 million to buy the land, and if each rancher sells their parcel for $600,000, the total cost will be $3 million (5 ranchers x $600,000 each), which is within her budget. Therefore, she can purchase all five parcels of land, and the railway will be built.

Question 13

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million. If each rancher agrees to sell his or her parcel of land to Mariana for $600,000, the economic pie will
A) not grow.
B) grow by $1 million.
C) grow by $2 million.
D) shrink by $ million.

Accepted Answer

The economic pie will grow by $1 million because Mariana is willing to pay $3 million for the land, but the ranchers are only asking for a total of $3 million ($600,000 each for 5 ranchers), which is $1 million more than the land's worth of $2 million.

Question 14

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million. If each rancher agrees to sell his or her parcel of land to Mariana for $600,000, the logical outcome in this situation is for the railway ________ , and the benevolent social planner is ________.
A) to be built; pleased
B) to be built; indifferent
C) not to be built; unhappy
D) not to be built; indifferent

Accepted Answer

The railway should be built because the ranchers are willing to sell their land for less than Mariana's budget of $2 million. The benevolent social planner would be pleased because the railway would benefit the community by providing a convenient and affordable way to travel to the casino.

Question 15

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that Mariana has $3 million to spend on their land and they also know that their land that Mariana needs is worth a total of $2 million. Each rancher believes that one or more of the other ranchers will settle for less than the maximum value of their land and therefore each decides to ask Mariana to pay $750,000 for their parcel of land. In this situation, Mariana will purchase
A) all five parcels of land and the railway will be built.
B) all five parcels of land but the railway will not be built.
C) only four parcels of land and the railway will be built.
D) no parcels of land and the railway will not be built.

Accepted Answer

Mariana has $3 million to spend, but if each rancher asks for $750,000, the total cost would be $3.75 million, which is more than Mariana has available. Therefore, she cannot purchase any of the parcels of land.

Question 16

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that Mariana has $3 million to spend on their land and they also know that their land that Mariana needs is worth a total of $2 million. Each rancher believes that one or more of the other ranchers will settle for less than the maximum value of their land and therefore each decides to ask Mariana to pay $750,000 for their parcel of land. In this situation, the economic pie will
A) grow by $3.75 million.
B) grow by $3 million.
C) not grow.
D) shrink by $1 million.

Accepted Answer

The economic pie will not grow because the ranchers' collective asking price exceeds Mariana's budget, preventing the transaction from occurring.

Question 17

Scenario 11.1: Mariana has decided that she would like to build a private electric railway that would directly connect her small town to her favorite casino 75 miles away. She discovers that to build her railway, she will need to purchase an equal amount of land from 5 ranchers: Abe, Ben, Cat, Don, and Eve. Mariana believes that the revenue she would receive from running the railroad would be enough to cover all of her construction costs and leave her $3 million to buy the land. Mariana calculates the land she needs to build the railway will cost her $2 million.
-Refer to Scenario 11.1. Suppose all five ranchers know that Mariana has $3 million to spend on their land and they also know that their land that Mariana needs is worth a total of $2 million. Each rancher believes that one or more of the other ranchers will settle for less than the maximum value of their land and therefore each decides to ask Mariana to pay $750,000 for their parcel of land. The logical outcome in this situation is for the railway ________ , and the benevolent social planner is ________.
A) to be built; pleased
B) to be built; indifferent
C) not to be built; unhappy
D) not to be built; indifferent

Accepted Answer

The total cost demanded by the ranchers exceeds Mariana's budget ($3.75 million vs. $3 million), making it impossible for her to afford the land for the railway. This outcome is inefficient and undesirable from a social planner's perspective, who would prefer that resources be used in a way that benefits society, such as by building the railway.

Question 18

When providing a good involves assembling several parcels of contiguous land, private individuals may encounter difficulty negotiating the purchase of those parcels.

Accepted Answer

This difficulty arises due to the "holdout" problem, where one or more landowners refuse to sell their parcels at a reasonable price, knowing their land is essential for the project, thus complicating or blocking the assembly of the needed contiguous land.

Question 19

Economists refer to a holdout as someone who refuses to produce a pure public good with private funds.

Accepted Answer

A holdout refers to someone who refuses to sell their property or rights, often in the context of collective action or negotiation, not specifically to the refusal to produce a public good with private funds.

Question 20

In general, it is easier to negotiate the purchase of noncontiguous parcels of land than it is to negotiate the purchase of similar land parcels that are contiguous.

Accepted Answer

Noncontiguous parcels of land are not adjacent to each other, which makes it easier to negotiate their purchase separately. Contiguous parcels of land, on the other hand, are adjacent to each other, which can make it more difficult to negotiate their purchase as a single unit.

Quiz 11: Public Goods: Tackling Large Projects and Eminent Domain

In economics, a negotiator who hopes to get an unusually large amount of money for land by refusing to come to terms is called a(n)

For which of the following projects would it likely be most difficult to acquire 1,000 acres of land?

For which of the following projects would it likely be least difficult to acquire 1,000 acres of land?

Providing a good would likely be most difficult when the project involves assembling

When providing a good involves assembling several parcels of contiguous land, private individuals may encounter difficulty negotiating the purchase of those parcels.

Economists refer to a holdout as someone who refuses to produce a pure public good with private funds.

In general, it is easier to negotiate the purchase of noncontiguous parcels of land than it is to negotiate the purchase of similar land parcels that are contiguous.