Question 1

Due to the externalities associated with public goods and common resources,

Accepted Answer

A)  private markets will lead to an efficient allocation of resources.
B)  government intervention can potentially raise economic well-being.
C)  private markets will correct for the gain or loss to consumer surplus.
D)  the free-rider problem is eliminated.E) None of the above
F) A) and B)

Question 2

The Tragedy of the Commons occurs because

Accepted Answer

A)  government property is most heavily used by the wealthy.
B)  everyone deserves an equal share of government property.
C)  social and private incentives differ.
D)  established property rights create competition.E) None of the above
F) A) and D)

Question 3

Which of the following is not a reason why government agencies subsidize basic research?

Accepted Answer

A)  The private market devotes too few resources to basic research.
B)  The general knowledge developed through basic research can be used without charge.
C)  The social benefit of additional knowledge is perceived to be greater than the cost of the subsidies.
D)  The government wants to attract the brightest researchers away from private research firms.E) A) and B)
F) A) and C)

Question 4

If everyone benefits from helping the poor,

Accepted Answer

A)  government intervention cannot improve social well-being.
B)  eliminating taxes aimed at redistributing income will make rich people better off.
C)  taxing the wealthy to raise living standards of the poor can potentially make everyone better off.
D)  private markets can adequately provide charity programs to help the poor, despite free-rider problems.E) A) and D)
F) A) and C)

Question 5

Which of the following is not a reason that the findings of cost-benefit analyses on public goods are only rough approximations?

Accepted Answer

A)  Without prices, it is difficult to be sure how much people really value a good.
B)  Analysts can't be sure that the respondents to surveys are telling the truth.
C)  Analysis must include not only the cost of building the project but also the cost of maintenance, if any.
D)  People value goods differently if they are publicly provided rather than privately provided.E) A) and C)
F) B) and C)

Question 6

In the Tragedy of the Commons,joint action among the individual citizens would be necessary to solve their common resource problem unless the government intervenes.

Accepted Answer

A) True 
 B)False

Question 7

A free-rider problem exists for any good that is not

Accepted Answer

A)  rival in consumption.
B)  a private good.
C)  free.
D)  excludable.E) A) and C)
F) A) and B)

Question 8

When Susie uses a common resource and diminishes other people's enjoyment of it,she creates

Accepted Answer

A)  a market force.
B)  an externality.
C)  an invisible hand.
D)  excludability.E) A) and D)
F) B) and C)

Question 9

When one person uses a common resource,which of the following does not occur?

Accepted Answer

A)  An externality will occur.
B)  Other people are worse off.
C)  It is difficult to charge the person for the use of the resource.
D)  No one else will be able to use the resource.E) A) and B)
F) A) and C)

Question 10

The Tragedy of the Commons results when a good is

Accepted Answer

A)  rival in consumption and not excludable.
B)  excludable and not rival in consumption.
C)  both rival in consumption and excludable.
D)  neither rival in consumption nor excludable.E) None of the above
F) A) and B)

Question 11

When something of value has no price attached to it,

Accepted Answer

A)  externalities will be present.
B)  the product cannot be produced at any price.
C)  a natural monopoly will eventually produce the product, and the good will no longer be free.
D)  private companies will eventually produce the product, and the good will no longer be free.E) A) and B)
F) C) and D)

Question 12

Which of the following goods is rival and not excludable?

Accepted Answer

A)  an uncongested toll road
B)  an uncongested nontoll road
C)  a congested nontoll road
D)  a congested toll roadE) B) and D)
F) B) and C)

Question 13

An example of a natural monopoly would be

Accepted Answer

A)  a congested public freeway.
B)  an airline flight that has been overbooked.
C)  local cable television service.
D)  public parking.E) B) and D)
F) B) and C)

Question 14

Private companies will invest in medical research if

Accepted Answer

A)  they will produce general knowledge.
B)  they will produce a specific product for which they may receive a patent.
C)  there is no government intervention in the market for medical products.
D)  others will benefit from their discoveries.E) B) and C)
F) All of the above

Question 15

A stairwell in a certain office building is always congested at 12:00 p.m.and 2:00 p.m.The congestion is so bad that people have been complaining to the building's owner.Which of the following methods would be the most efficient way of reducing congestion?

Accepted Answer

A)  Charge everyone who uses the stairwell when it is congested a fee based on their income so that richer people will pay more than poorer people.
B)  Encourage people to voluntarily keep off the stairwell during peak times.
C)  Charge everyone who uses the stairwell when it is congested the same fee.People who value the use of the stairs the most will be the ones who use the stairwell at peak times.
D)  Hold a lottery to determine who wins the right to use the stairwell at peak times.E) A) and B)
F) A) and C)

Question 16

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

Accepted Answer

A)  a candy bar
B)  a painting by Monet
C)  a beautiful sunset
D)  a crowded beachE) C) and D)
F) B) and C)

Question 17

Which of the following is not an advantage to congestion charges for motorists who wish to drive on busy streets?

Accepted Answer

A)  reduced carbon monoxide pollution
B)  increased use of public transportation
C)  improved taxi service
D)  increased government revenuesE) None of the above
F) A) and B)

Question 18

The government provides public goods because

Accepted Answer

A)  private markets would not produce any of the goods.
B)  private markets would not produce the efficient quantity of the goods.
C)  private markets would charge too high a price for the goods.
D)  the government produces public goods more efficiently than private markets can.E) A) and C)
F) B) and C)

Question 19

A vacation house in Colorado is

Accepted Answer

A)  not rival in consumption and excludable.
B)  rival in consumption and excludable.
C)  not rival in consumption and not excludable.
D)  rival in consumption and not excludable.E) B) and D)
F) B) and C)

Question 20

Suppose that SmallCity,USA,is considering hiring an additional police officer.The reduction in crime is estimated to be worth $20 for each of SmallCity's 3,000 residents.What should the city do?

Accepted Answer

A)  Hire the police officer because additional safety is priceless.
B)  Hire the police officer if the cost of the new officer is less than $60,000.
C)  Do not hire the police officer because the costs exceed the benefits.
D)  Hire the police officer only if the benefit to the residents exceeds $3,000.E) A) and D)
F) All of the above

Exam 11: Public Goods and Common Resources

An example of a natural monopoly would be

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In the Tragedy of the Commons,joint action among the individual citizens would be necessary to solve their common resource problem unless the government intervenes.

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Due to the externalities associated with public goods and common resources,

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Which of the following goods is rival and not excludable?

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The Tragedy of the Commons results when a good is

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A free-rider problem exists for any good that is not

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Suppose that SmallCity,USA,is considering hiring an additional police officer.The reduction in crime is estimated to be worth $20 for each of SmallCity's 3,000 residents.What should the city do?

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Which of the following is not an advantage to congestion charges for motorists who wish to drive on busy streets?

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When one person uses a common resource,which of the following does not occur?

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When Susie uses a common resource and diminishes other people's enjoyment of it,she creates

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If everyone benefits from helping the poor,

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

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The government provides public goods because

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A vacation house in Colorado is

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When something of value has no price attached to it,

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Which of the following is not a reason that the findings of cost-benefit analyses on public goods are only rough approximations?

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A stairwell in a certain office building is always congested at 12:00 p.m.and 2:00 p.m.The congestion is so bad that people have been complaining to the building's owner.Which of the following methods would be the most efficient way of reducing congestion?

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The Tragedy of the Commons occurs because

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Which of the following is not a reason why government agencies subsidize basic research?

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Private companies will invest in medical research if

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