Exam 15: Public Goods and Public Choice

Public goods:

Suppose Patty has a house in a good neighborhood in Philadelphia,PA.She decides to have the exterior of her house painted and the windows replaced.After the work is completed her house has appreciated in value and has also helped the neighbors' houses to go up in value.This is an example of a:

A harbor lighthouse that guides approaching ships is an example of:

PAYING LANDOWNERS TO HOST WOLVES We can apply the concepts of public goods and free riding to the issue of preserving wildlife.There are some tradeoffs associated with preserving wolves and other wildlife in Yellowstone Park.To environmentalists,wolves are a part of the natural ecosystem.To ranchers,wolves are predators that eat livestock.In other words,there are costs as well as benefits associated with the preservation of wolves,just as there are costs and benefits associated with other public goods such as dams,fireworks,national defense,and space exploration. One response to the wolf-preservation problem comes from Defenders of Wildlife,an environmental group in Montana.The organization collects money from its members and uses the money to reward landowners who allow wolves to live on their properties.The host landowner receives a payment of $5,000 for each litter of wolf pups reared on the property.In addition,the organization compensates ranchers for livestock killed by wolves. As a result of these programs,ranchers in the Yellowstone area are more likely to support efforts to maintain the wolves as part of Yellowstone Park's ecosystem.The programs treat preservation as a public good,one that is supported by money contributed by people who benefit from preservation.The organization has collected contributions from thousands of people despite the free-rider problem.The success of Defenders of Wildlife illustrates one of the key principles of economics. SOURCE: Terry L.Anderson,"A Carrot to Save the Wolf," The Margin,Spring 1992,p.28. -Recall the application about the median voter in the NBA.who was benefited from the 1997 agreement that use salary caps and other provisions?

Recall the application about a town building a clock tower and only putting clock faces on three sides of the tower.If a citizen of this town did not contribute toward the clock's construction but used it each day,he/she would be considered a:

If the production of a good generates external benefits,the government could increase efficiency by:

Recall the example about the dam and the farmers,the cause of building the dam is spread among a small special interest group (farmers)and the benefit is obtained by the taxpayers.

The free-rider problem arises when the number of individuals who can benefit is large and exclusion of most of them is possible.

What is the median-voter rule?

Recall the application about how a private good,LoJack,generates external benefits as well as private benefits.Which of the following is NOT a benefit from the LoJack system?

Explain the difference between private and public goods.

If Paul improves the landscape of the house by planting new grass,trimming the trees and also adding a fence,making the value of his house go up.Then the following will happen:

A politician might pursue his own interest even though it may differ from the public interest.

What defines a situation where a person consumes a good without having to pay for it?

Suppose that during the pledge drive in October,the local public radio gives contributors a free subscription to the daily newsletters return for their monetary contribution.This gift will likely:

Recall the application about a town building a clock tower and only putting clock faces on three sides of the tower.How might a town eliminate the free-rider problem associated with a good,such as a clock tower?

Goods that are nonrival in consumption and that have benefits that are nonexcludable are:

When a few people share the benefit from a project and a large number of people pay for the cost,the government is more likely to approve inefficient projects.

Free riding is a problem with public goods but not with private goods because for the private good:

Which of the following would be typically classified as a public good?