Question 1

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service. The value of the service to each of them is $50 and it costs $80 to hire a housecleaner. Should they hire a housecleaner?

Accepted Answer

The total value of the service to both of them is $100 ($50 each) which is greater than the cost of hiring a housecleaner ($80). Therefore, they should hire a housecleaner as it will result in a consumer surplus for both of them.

Question 2

The "tragedy of the commons" refers to the phenomenon where

Accepted Answer

The tragedy of the commons refers to the situation where people overuse a common resource because individuals do not face the full costs of their actions, and thus, the resource is not used sustainably. This leads to depletion or degradation of the resource, negatively affecting not only individuals but also society as a whole. The concept was first introduced by Garrett Hardin in 1968 to illustrate the challenges of managing shared resources.

Question 3

Private producers have no incentive to provide public goods because

Accepted Answer

Private producers have no incentive to provide public goods because once produced, it will not be possible to exclude those who do not pay for the good. This leads to free-riders who benefit from the good without paying for it, resulting in private producers being unable to earn a profit.

Question 4

A tragedy of the commons occurs when a resource is

Accepted Answer

Tragedy of the commons occurs when a resource is rival and nonexcludable, meaning that it is depleted as people use it and there is no way to prevent people from using it. This leads to overuse and exhaustion of the resource. Examples of such resources include fish in the ocean, clean air, and public parks.

Question 5

Which of the following is an example of a quasi-public good?

Accepted Answer

The answer of Which of the following is an example...

Question 6

One difference between the demand for a private good and that for a public good is that

Accepted Answer

With a private good, each consumer can choose the quantity they want to consume based on their own preferences and budget constraints, while with a public good, the quantity consumed is taken as given since it is jointly consumed by all individuals in society. Thus, everyone consumes the same quantity of a public good.

Question 7

The demand curve for a public good is also called the

Accepted Answer

The demand curve for a public good is also called the marginal social benefit curve because it represents the additional benefit society receives from consuming one more unit of the public good. Choices A, C, and D do not accurately describe the demand curve for a public good.

Question 8

Common resources differ from public goods in that

Accepted Answer

Common resources and public goods both have the characteristic of being non-excludable, meaning that it is difficult to prevent people from using them. However, common resources are rival in consumption, meaning that their use by one individual reduces the available amount for others, while public goods are non-rival, meaning that their use by one individual does not reduce the amount available for others. The other options are incorrect as common resources can be collectively owned by a group or individuals, and not all common resources are non-renewable.

Question 9

In economics, the term "free rider" refers to

Accepted Answer

A free rider is someone who benefits from a good or service without bearing the full cost of it. In other words, they enjoy the benefits of something that someone else has worked to produce or pay for without contributing themselves. This can lead to a situation where too few people are willing to bear the costs of producing a public good or service, leading to a suboptimal level of provision.

Question 10

Which of the following is an example of a common resource?

Accepted Answer

The answer of Which of the following is an example...

Question 11

How does the construction of a market demand curve for a private good differ from that for a public good?

Accepted Answer

The answer of How does the construction of a market...

Question 12

Which of the following is an example of a common resource?

Accepted Answer

Sea otters in the coastal waters of the Pacific Ocean are a common resource because they are not privately owned or managed by any one group or individual. They are shared by the general public and can be used by anyone who has access to them. A common resource is a type of good that is non-excludable and rivalrous, meaning that it is difficult to prevent others from using it and using it often reduces the amount available to others.

Question 13

Which of the following is an example of a product that is nonexcludable and rival?

Accepted Answer

A free concert in a park is an example of a nonexcludable and rival product as people can attend the concert for free and the enjoyment of one person does not diminish the enjoyment of others, but seating may be limited. National defense is nonexcludable but not rival, as the protection provided to one person does not diminish the protection provided to others. Automobiles are rival but not nonexcludable as people must purchase or access them in order to use them. Flu vaccinations are nonexcludable but not rival as the vaccination can be used by multiple people but one person getting vaccinated does not reduce the availability of the vaccine for others.

Question 14

Which of the following exemplifies the tragedy of the commons?

Accepted Answer

The tragedy of the commons refers to a situation where a shared resource (such as the Malaysian tapir in this case) is depleted or damaged due to individuals acting in their own self-interest rather than considering the collective good. Here, the poachers are hunting the tapir for their own profit, regardless of the negative impact it may have on the species as a whole.

Question 15

For-profit producers will produce only private goods because

Accepted Answer

The answer of For-profit producers will produce only private goods...

Question 16

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service. The value of the service to each of them is $50 and it costs $80 to hire a housecleaner. Suppose Bella is lazy and a spendthrift and Sefronia suspects that Bella will be willing to pay $80. What is Sefronia likely to do, given that she is as rational as any other person?

Accepted Answer

The answer of Sefronia and Bella share an apartment and...

Question 17

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

Accepted Answer

The government is likely to evaluate the costs and benefits of producing the public good in order to determine the appropriate quantity to be supplied. This involves weighing the costs of producing the good against the benefits it will provide to society in terms of increased access or improved infrastructure. This process is known as cost-benefit analysis and is a common tool used by governments to guide public policy decisions.

Question 18

Consider the stock of ocean tuna which is massively overfished. It is rational for an individual to exploit the resource rather than to conserve the stock because

Accepted Answer

The answer of Consider the stock of ocean tuna which...

Question 19

The market demand for a public good can be determined by

Accepted Answer

The market demand for a public good can be determined by adding up how much each consumer is willing to pay for each unit of the public good. This is because public goods are non-excludable and non-rivalrous, meaning that everyone can consume them and consuming them does not reduce the amount available to others. As a result, individuals will not reveal their willingness to pay for the public good in the same way they would for a private good. The total value of the public good is therefore the sum of each individual's willingness to pay.

Question 20

Which of the following displays rivalry and excludability in consumption?

Accepted Answer

Private goods display both rivalry and excludability in consumption. Rivalry means that the consumption of one unit of the good by an individual reduces the availability of the good for others, and excludability means that it is possible to prevent someone from consuming the good if they don't pay for it.

Quiz 5: Externalities, Environmental Policy, and Public Goods

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service. The value of the service to each of them is $50 and it costs $80 to hire a housecleaner. Should they hire a housecleaner?

The "tragedy of the commons" refers to the phenomenon where

Private producers have no incentive to provide public goods because

A tragedy of the commons occurs when a resource is

Which of the following is an example of a quasi-public good?

One difference between the demand for a private good and that for a public good is that

The demand curve for a public good is also called the

Common resources differ from public goods in that

In economics, the term "free rider" refers to

Which of the following is an example of a common resource?

How does the construction of a market demand curve for a private good differ from that for a public good?

Which of the following is an example of a common resource?

Which of the following is an example of a product that is nonexcludable and rival?

Which of the following exemplifies the tragedy of the commons?

For-profit producers will produce only private goods because

For certain public projects such as building a dam on a river or a bridge to an island, what procedure is a government likely to use to determine what quantity of a public good should be supplied?

Consider the stock of ocean tuna which is massively overfished. It is rational for an individual to exploit the resource rather than to conserve the stock because

The market demand for a public good can be determined by

Which of the following displays rivalry and excludability in consumption?