Chapter 11/Public Goods and Common Resources 63 Chapter 11 Public Goods and Common Resources Which of the following is NOT a characteristic of a public good? a It requires resources to produce b It is not diminished or depreciated as additional people consume the good c Its benefits cannot be withheld from anyone d It is a free good with zero opportunity cost ANSWER: d It is a free good with zero opportunity cost SECTION: 1 OBJECTIVE: 1 Which of the following would be the best example of a public good? a a candy bar b a painting by Monet c a beautiful sunset d a crowded beach ANSWER: c a beautiful sunset SECTION: 1 OBJECTIVE: 1 To achieve the optimal provision of public goods the a market should be allowed to find its equilibrium without government intervention b government must limit the provision of the goods c government must tax producers of these goods d government must either provide the goods or subsidize their production ANSWER: d government must either provide the goods or subsidize their production SECTION: 1 OBJECTIVE: 1 Imagine a 2,000acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited to enjoy its beauty. Of course, when the weather is nice it is difficult to find parking, and the trash cans overflow with food wrappers on summer afternoons. Otherwise, it is a great place. The park is a common good because a when trash cans overflow, a negative externality becomes a positive externality b it is not fenced to control access c if too many people use it, one person’s use can prevent others from using it d you have to drive to get there and the automobile is a private good ANSWER: c if too many people us it, one person’s use can prevent others from using it SECTION: 1 OBJECTIVE: 1 Public goods are a rival and excludable b rival but excludable c nonrival but excludable d nonrival and nonexcludable ANSWER: d nonrival and nonexcludable SECTION: 1 OBJECTIVE: 1 64 Chapter 11/Public Goods and Common Resources Private goods are a rival and excludable b rival but excludable c nonrival but excludable d nonrival and nonexcludable ANSWER: a rival and excludable SECTION: 1 OBJECTIVE: 1 Who among the following is a free rider? a Barry steals candy from the store where he works b Betty regularly uses the local public library in the town in which she lives c Joe drives 20,000 miles a year on public streets, but he pays no more in taxes than Sam, who only drives 1,000 miles d Fred watches many public television programs, but he has never sent in a contribution to the station ANSWER: d Fred watches many public television programs, but he has never sent in a contribution to the station SECTION: 2 OBJECTIVE: 2 People have little incentive to produce a public good because a the social benefit is less than the private benefit b the social benefit is less than the social cost c there is a freerider problem d there is a tragedy of the commons ANSWER: c there is a freerider problem SECTION: 2 OBJECTIVE: 2 The freerider problem a forces supply of a public good to exceed demand b allows more people to pay for the public good than if it were a private good c encourages overuse of a good that is freely available d holds the equilibrium quantity of a public good below the economically efficient level ANSWER: d holds the equilibrium quantity of a public good below the economically efficient level SECTION: 2 OBJECTIVE: 2 Chapter 11/Public Goods and Common Resources 65 This table describes the defense demands for three groups of people in Happyville. Each curve shows the maximum amount the group is willing to pay for a given quantity of Happyville defense Price Group #1 Group #2 Group #3 $14 0 $12 0 $10 $8 $6 13 $4 13 22 $2 22 33 $0 33 44 10 What is the value of the 33 a $0 b $2 c $4 d $6 ANSWER: d $6 SECTION: 2 OBJECTIVE: 3 13 22 33 44 58 rd unit of national defense in Happyville? 11 If the marginal cost of national defense is constant at $12 per unit, what is the efficient level of national defense to provide? a 6 units b 13 units c 22 units d 33 units ANSWER: c 22 units SECTION: 2 OBJECTIVE: 3 12 A drawback of government provision of a public good is that a the government lacks information about what people are willing to pay for the good b taxes have to be raised to pay for the good c the government does not provide enough of any public good d it would be cheaper for the private sector to provide the good ANSWER: a the government lacks information about what people are willing to pay for the good SECTION: 2 OBJECTIVE: 4 13 A drawback of government provision of a public good is that a government programs may reflect political considerations rather than economic efficiency b taxes have to be raised to pay for the good c the government does not provide enough of any public good d it would be cheaper for the private sector to provide the good ANSWER: a government programs may reflect political considerations rather than economic efficiency SECTION: 2 OBJECTIVE: 5 66 Chapter 11/Public Goods and Common Resources 14 The “open source” movement in the technology industry supports the idea that programming code should be made freely available. This group believes that a there is a negative externality generated by technological advancement when private property rights are enforced b the costs of maintaining private property rights are greater than the benefit to society of making advances freely available c the costs of maintaining private property rights are less than the benefits to society of making advances freely available d the costs and benefits of making advances freely available exactly offset one another ANSWER: c the costs of maintaining private property rights are less than the benefits to society of making advances freely available SECTION: 2 OBJECTIVE: 4 15 If antipoverty and public assistance programs are public goods, then a the private benefits to society of providing such programs are undervalued b the private marketplace can provide a socially optimal quantity of these programs with no government interference c the private benefits to society of providing such programs are overvalued d Both a and b are correct ANSWER: a the private benefits to society of providing such programs are undervalued SECTION: 2 OBJECTIVE: 4 16 The best way of determining the value of a human life is to a evaluate the value of their expected earnings in the labor market b evaluate the risks people are willing to take and what they would have to be paid to take them c determine how much money a person had at the time of death d do nothing; human life is priceless ANSWER: b evaluate the risks people are willing to take and what they would have to be paid to take them SECTION: 2 OBJECTIVE: 4 17 A television signal is an example of a a private good b a nonrival good c a social good d a normal good ANSWER: b a nonrival good SECTION: 3 OBJECTIVE: 5 18 Music is an example of a a private good b a social good c a nonrival good d a common good ANSWER: c a nonrival good SECTION: 3 OBJECTIVE: 5 Chapter 11/Public Goods and Common Resources 67 19 The commercial value of ivory is a threat to the elephant, but the commercial value of beef is a guardian of the cow. This is because a the cow is raised in developed economies while the elephant lives primarily in lessdeveloped nations b cows are private goods while elephants tend to roam without owners c cows and elephants are public goods, but ivory is nonrival d ivory is nonrival and nonexclusive but beef is rival and exclusive ANSWER: b cows are private goods while elephants tend to roam without owners SECTION: 3 OBJECTIVE: 5 20 What causes the tragedy of the commons? a Social and private incentives differ b Common goods are nonrival and nonexclusive c Common goods are nonexclusive, but rival d Both A and C are correct ANSWER: d Both A and C are correct SECTION: 3 OBJECTIVE: 5 21 The overuse of a common resource relative to its economically efficient use is called a monopolistic competition b tragedy of the commons c common resource abuse d communism ANSWER: b tragedy of the commons SECTION: 3 OBJECTIVE: 5 22 The tragedy of the commons is the a fact that government regulation is required to combat externalities b overuse of a common resource relative to its economically efficient use c idea that monopoly elements in society lead to inefficient production d false hope that government can solve our social problems ANSWER: b overuse of a common resource relative to its economically efficient use SECTION: 3 OBJECTIVE: 5 23 When species of life are endangered because they are overhunted, the problem is said to be a economically unsound b environmentally inefficient c a positive externality d a tragedy of the commons ANSWER: d a tragedy of the commons SECTION: 3 OBJECTIVE: 6 24 An overcrowded beach is an example of a a positive externality b a tragedy of the commons c environmentally inefficient allocation d economically unsound allocation ANSWER: b a tragedy of the commons SECTION: 3 OBJECTIVE: 6 68 Chapter 11/Public Goods and Common Resources 25 One economically efficient way to eliminate the tragedy of the commons is to a tax the owners of the resource b prevent anyone from using the resource c reduce the marginal social benefit of the resource d establish private ownership of the resource ANSWER: d establish private ownership of the resource SECTION: 3 OBJECTIVE: ...64 Chapter 11/ Public Goods and Common Resources Private goods are a rival and excludable b rival but excludable... holds the equilibrium quantity of a public good below the economically efficient level SECTION: 2 OBJECTIVE: 2 Chapter 11/ Public Goods and Common Resources 65 This table describes the defense demands for three groups of people in Happyville. Each curve shows ... government programs may reflect political considerations rather than economic efficiency SECTION: 2 OBJECTIVE: 5 66 Chapter 11/ Public Goods and Common Resources 14 The “open source” movement in the technology industry supports the idea that programming code