Question 1

When majority rule voting is used to determine whether to purchase a public good,
A) the efficient outcome is assured.
B) the median voter gets her way.
C) the sum of the marginal benefits must equal marginal cost.
D) the marginal benefit of the good to the median voter equals the good's marginal cost.

Accepted Answer

In majority rule voting, the outcome that is preferred by the majority of voters is chosen. However, this does not necessarily lead to an efficient outcome or one where the marginal benefits equal marginal cost. In fact, it is possible for a minority with strong preferences to be consistently outvoted by a majority with weaker preferences. The only guarantee is that the outcome will be preferred by the median voter, who is the one with exactly half of the voters preferring a higher level of the public good and half preferring a lower level. Thus, choice B is correct.

Question 2

Explain why state governments may charge a fee for beach access to address the commons problem.

Accepted Answer

The answer of Explain why state governments may charge a...

Question 3

Which of the following goods has the property of rivalry?
A) national defense
B) a highway
C) a public beach
D) a movie screening

Accepted Answer

The answer of Which of the following goods has the...

Question 4

To alleviate the commons problem,the government can
A) apply a tax.
B) set a quota.
C) assign property rights.
D) All of the above.

Accepted Answer

All of the options mentioned, applying a tax, setting a quota, and assigning property rights, are methods the government can use to alleviate the commons problem by either limiting use, encouraging responsible use, or creating individual accountability for resources.

Question 5

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a
A) private good.
B) public good.
C) Giffen Good.
D) Coase Good.

Accepted Answer

A public good is a commodity or service whose consumption by one person does not reduce the amount available for others to consume. Examples include national defense and street lighting, which can be enjoyed by all members of society regardless of their contribution to their provision.

Question 6

Fishermen on the East Coast are using lobster traps out of which most of the lobsters that enter can escape.Why?
A) It will make over-fishing less likely.
B) They can't come up with better traps.
C) They are not educated enough to maximize profit.
D) They catch more lobsters this way.

Accepted Answer

By using lobster traps that allow most of the lobsters to escape, fishermen can ensure that they are not depleting the lobster population and contributing to over-fishing. This can help to maintain a sustainable fishery for the future.

Question 7

Markets tend to produce too little of an excludable public good because
A) transaction costs are high.
B) of the lack of rivalry.
C) these goods are depletable.
D) All of the above.

Accepted Answer

Excludable public goods do not generate rivalry among consumers, which means that the consumption of one person does not reduce the amount of the good available to others. Therefore, the market does not have the same incentive to produce as many excludable public goods as it does for rival goods. This is because the market relies on competition to allocate resources effectively, and in the absence of rivalry, that competition is lacking.

Question 8

In the case of a good that has no exclusion and no rivalry,private markets fail because
A) of free-ridership.
B) this is a natural monopoly.
C) profit is driven down to zero.
D) the quantity produced will exceed the social optimum.

Accepted Answer

Without the ability to exclude non-payers, individuals have an incentive to free-ride on the efforts of others to produce the good. This leads to underproduction of the good and inefficient outcomes.

Question 9

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the chemical firm owns the lake and the beach owner must pay the chemical firm $10 to produce only one ton of pollution,what is the outcome? If the beach owner owns the lake and the chemical firm must pay $10 per ton of pollution,what is the outcome? Compare this result to the case where nobody owns the lake.

Accepted Answer

The answer of 
-The above figure shows the payoff matrix...

Question 10

For the following, please answer "True" or "False" and explain why.
-Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

Accepted Answer

It is the fact that social and private incentives diverge that creates the problem.The profit-maximizing quantity of fish for the fishermen exceeds the social optimal quantity of fish that will maintain the stock.Over-fishing (and maybe extinction)will result.

Question 11

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the
A) marginal benefit to the median voter.
B) marginal benefit to each individual.
C) sum of all individual marginal benefits.
D) sum of all individual marginal benefits divided by the number of voters.

Accepted Answer

The efficient quantity of a pure public good is achieved when the marginal cost of producing the good equals the sum of all individual marginal benefits. This is because a pure public good is non-excludable and non-rivalrous, meaning that one person's consumption does not reduce the availability for others, and everyone can benefit from it simultaneously. Therefore, the efficient production level considers the total benefits to all individuals, not just to any single individual or an average across individuals.

Question 12

The Commons Problem arises because
A) firms don't maximize profits.
B) social and private incentives are not aligned and property rights are missing.
C) social cost equals private cost and property rights are missing.
D) social benefit equals private benefit and property rights are missing.

Accepted Answer

The Commons Problem arises because social and private incentives are not aligned and property rights are missing. When a resource is unowned or there are no clear property rights, individuals have an incentive to exploit it for their own benefit, even if this leads to the depletion or degradation of the resource over time. This is known as the tragedy of the commons. To address this problem, institutions and policies may be necessary to create incentives for cooperation and stewardship of shared resources.

Question 13

A public good in which exclusion is possible is called
A) an exclusive good.
B) a common good.
C) an impure good.
D) a club good.

Accepted Answer

A club good is a public good in which exclusion is possible, meaning only paying members have access to the good. Examples of club goods include private parks and satellite TV channels.

Question 14

A common resource is best described as a resource where
A) there is a positive externality in consumption.
B) there is a negative externality in consumption.
C) there is a positive externality in production.
D) there is a negative externality in production.

Accepted Answer

A common resource is best described as a resource where there is a negative externality in consumption. This occurs because individuals do not bear the full cost of their consumption, leading to overuse or depletion of the resource.

Question 15

When majority rule voting is used to determine whether to purchase a public good,
A) the efficient outcome is not assured.
B) the median voter gets her way.
C) the sum of the marginal benefits is ignored.
D) All of the above.

Accepted Answer

Majority rule voting for public goods often does not assure efficiency because it may not account for the intensity of individual preferences, leading to outcomes where the median voter's preference prevails and the aggregate of marginal benefits across all individuals is not maximally utilized.

Question 16

Which of the following is NOT a common property?
A) a city park
B) a main street
C) a public beach
D) a movie screening

Accepted Answer

A movie screening is not a physical space or area, it is an event. The other options listed are all examples of common properties that are available for public use.

Question 17

Which of the following is NOT a club good?
A) cable television
B) a rock concert
C) a country club
D) a baseball bat

Accepted Answer

A club good is defined as a good that is: excludable, meaning that it is possible to prevent someone from accessing the good, and rivalrous, meaning that consumption of the good by one person reduces the amount available for others. Cable television, a rock concert, and a country club are all examples of club goods because they are excludable and rivalrous. However, a baseball bat is not a club good because it can be used by multiple people at the same time without reducing its availability to others.

Question 18

The total demand for a public good is found by
A) horizontally summing all individual demands.
B) vertically summing all individual demands.
C) finding the demand from the median voter.
D) dividing the marginal cost of the good by the number of voters.

Accepted Answer

The total demand for a public good is found by vertically summing all individual demands because each individual's valuation of the public good at each quantity is added together to find the total value to society at that quantity.

Question 19

Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use.

Accepted Answer

The answer of Explain the externality generated when a shepherd...

Question 20

For the following, please answer "True" or "False" and explain why.
-The efficient quantity of a public good occurs when the marginal cost of providing that good equals the sum of the marginal benefits to all individuals.

Accepted Answer

The demand for the public good is found by vertically summing so that we have the sum of the marginal benefits at each quantity.

Quiz 17: Property Rights, externalities, rivalry, and Exclusion

When majority rule voting is used to determine whether to purchase a public good,

Explain why state governments may charge a fee for beach access to address the commons problem.

Which of the following goods has the property of rivalry?

To alleviate the commons problem,the government can

A commodity or service whose consumption by one person does not preclude others from also consuming it is called a

Fishermen on the East Coast are using lobster traps out of which most of the lobsters that enter can escape.Why?

Markets tend to produce too little of an excludable public good because

In the case of a good that has no exclusion and no rivalry,private markets fail because

For the following, please answer "True" or "False" and explain why. -Over-fishing of common fishing grounds happens because fishing grounds are a common property and social and private incentive are the same.

The efficient quantity of a pure public good occurs when the marginal cost of producing that good equals the

The Commons Problem arises because

A public good in which exclusion is possible is called

A common resource is best described as a resource where

When majority rule voting is used to determine whether to purchase a public good,

Which of the following is NOT a common property?

Which of the following is NOT a club good?

The total demand for a public good is found by

Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use.

For the following, please answer "True" or "False" and explain why. -The efficient quantity of a public good occurs when the marginal cost of providing that good equals the sum of the marginal benefits to all individuals.