Question 1

For a public good, nonpayers _____ excluded from obtaining the benefits of the good.

Accepted Answer

A)  can be 
B)  are automatically 
C)  usually are 
D)  cannot be 
A)  can be 
B)  are automatically 
C)  usually are 
D)  cannot be

Question 2

A low voter turnout can be explained by noting that political action is a public good and people who don't vote can free-ride on those who do.

Accepted Answer

A) True 
 B)False

Question 3

For a nonrival good like pay-per-view television programs, the private market will lead to:

Accepted Answer

A)  production of too much of the good. 
B)  consumption of too much of the good. 
C)  consumption of too little of the good. 
D)  outsourcing its production. 
A)  production of too much of the good. 
B)  consumption of too much of the good. 
C)  consumption of too little of the good. 
D)  outsourcing its production.

Question 4

If the market supply and demand curves for a common resource include all costs and benefits, the common resource will:

Accepted Answer

A)  be underused. 
B)  be overused. 
C)  be used at the socially optimal level. 
D)  impose an external cost on society. 
A)  be underused. 
B)  be overused. 
C)  be used at the socially optimal level. 
D)  impose an external cost on society.

Question 5

An artificially scarce good is a good or service for which exclusion is _____ and which is _____ in consumption.

Accepted Answer

A)  possible; rival 
B)  possible; nonrival 
C)  not possible; rival 
D)  not possible; nonrival 
A)  possible; rival 
B)  possible; nonrival 
C)  not possible; rival 
D)  not possible; nonrival

Question 6

An e-book is similar to a published book in that it is _____, but it is also similar to national defense in that it is _____.

Accepted Answer

A)  rival in consumption; nonexcludable 
B)  nonrival in consumption; excludable 
C)  excludable; nonrival in consumption 
D)  nonexcludable; rival in consumption 
A)  rival in consumption; nonexcludable 
B)  nonrival in consumption; excludable 
C)  excludable; nonrival in consumption 
D)  nonexcludable; rival in consumption

Question 7

When the market does NOT result in an efficient allocation of scarce resources, economists say there has been:

Accepted Answer

A)  market dropout. 
B)  normative economics. 
C)  market disincentives. 
D)  market failure. 
A)  market dropout. 
B)  normative economics. 
C)  market disincentives. 
D)  market failure.

Question 8

For a public good, the marginal social benefit:

Accepted Answer

A)  equals the sum of the individual marginal benefits for all of the consumers of that unit. 
B)  equals the sum of each consumer's willingness to pay for that unit. 
C)  is greater than any individual marginal benefit. 
D)  equals the sum of the individual marginal benefits of all consumers of that unit, or the sum of each consumer's willingness to pay for that unit, and it is greater than any individual marginal benefit. 
A)  equals the sum of the individual marginal benefits for all of the consumers of that unit. 
B)  equals the sum of each consumer's willingness to pay for that unit. 
C)  is greater than any individual marginal benefit. 
D)  equals the sum of the individual marginal benefits of all consumers of that unit, or the sum of each consumer's willingness to pay for that unit, and it is greater than any individual marginal benefit.

Question 9

Artificially scarce goods are inefficiently consumed because the market price is zero.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions:
Figure: Correcting for Market Failure  
-(Figure: Correcting for Market Failure) There is an external cost in the market illustrated in the figure Correcting for Market Failure. Economists argue that in an unregulated private market, _____ is produced. In the figure, the supply curve (S1) reflects _____ marginal cost.

Accepted Answer

A)  too little; private 
B)  too much; private 
C)  too much; external 
D)  too little; external and private 
A)  too little; private 
B)  too much; private 
C)  too much; external 
D)  too little; external and private

Question 11

A good is most likely to be artificially scarce if:

Accepted Answer

A)  it is nonexcludable and nonrival. 
B)  the seller is a monopolist. 
C)  it is nonexcludable but rival. 
D)  it is excludable but nonrival. 
A)  it is nonexcludable and nonrival. 
B)  the seller is a monopolist. 
C)  it is nonexcludable but rival. 
D)  it is excludable but nonrival.

Question 12

For a public good, the marginal social benefit will be higher than any individual's marginal benefit of consumption.

Accepted Answer

A) True 
 B)False

Question 13

A good is excludable if nonpayers can be prevented from consuming it.

Accepted Answer

A) True 
 B)False

Question 14

Public goods should be provided to the point at which the marginal cost of production equals:

Accepted Answer

A)  the maximum price any individual is willing to pay for that unit. 
B)  the highest marginal benefit from any individual consumer of the good. 
C)  zero. 
D)  the sum of the individual marginal benefits from all consumers of that unit. 
A)  the maximum price any individual is willing to pay for that unit. 
B)  the highest marginal benefit from any individual consumer of the good. 
C)  zero. 
D)  the sum of the individual marginal benefits from all consumers of that unit.

Question 15

Use the following to answer questions:
Figure: Market Failure  
-(Figure: Market Failure) Look at the figure Market Failure. Suppose it represents the demand for and marginal cost per pound of shrimp in the bay. The additional cost of the shrimp due to the depletion of the common resource is equal to AC. Without government intervention, the price of shrimp will be _____ per pound.

Accepted Answer

A)  0 
B)  A 
C)  B 
D)  C 
A)  0 
B)  A 
C)  B 
D)  C

Question 16

Use the following to answer questions:
Figure: Correcting for Market Failure  
-(Figure: Correcting for Market Failure) There is an external cost in the market illustrated in the figure Correcting for Market Failure. If the government intervenes to correct for the external cost, the new _____ will now reflect _____ costs.

Accepted Answer

A)  supply curve S1; private and external 
B)  supply curve S2; private but not external 
C)  supply curve S2; private and external 
D)  demand curve (not shown); external but not private 
A)  supply curve S1; private and external 
B)  supply curve S2; private but not external 
C)  supply curve S2; private and external 
D)  demand curve (not shown); external but not private

Question 17

Use the following to answer questions:
Figure: An Individual's Marginal Benefit from a Public Good  
-(Figure: An Individual's Marginal Benefit from a Public Good) Look at the figure An Individual's Marginal Benefit from a Public Good. Assume that two individuals will share consumption of a public good; each individual has the marginal benefit curve shown in the figure. What is the total social benefit from four units of the public good?

Accepted Answer

A)  $16 
B)  $60 
C)  $144 
D)  $200 
A)  $16 
B)  $60 
C)  $144 
D)  $200

Question 18

The best example of a private good is:

Accepted Answer

A)  an automobile. 
B)  public education. 
C)  national defense. 
D)  law enforcement. 
A)  an automobile. 
B)  public education. 
C)  national defense. 
D)  law enforcement.

Question 19

Use the following to answer questions:  
-(Table: Total Cost and Total Individual Benefit) Look at the table Total Cost and Total Individual Benefit. Assume there are 1,000 residents and they all have the same total individual benefit, as shown in the table. If the residents acted together, how many officers would they hire?

Accepted Answer

A)  0 
B)  1 
C)  3 
D)  5 
A)  0 
B)  1 
C)  3 
D)  5

Question 20

Use the following to answer questions:
Figure: Market Failure  
-(Figure: Market Failure) Look at the figure Market Failure. Suppose it represents the demand for and marginal cost per pound of shrimp in the bay. The additional cost of the shrimp due to the depletion of the common resource is equal to AC. The output of F is _____ because the marginal social benefit is _____ the marginal cost.

Accepted Answer

A)  efficient; equal to 
B)  efficient; greater than 
C)  inefficient; greater than 
D)  inefficient; less than 
A)  efficient; equal to 
B)  efficient; greater than 
C)  inefficient; greater than 
D)  inefficient; less than

For a public good, nonpayers _____ excluded from obtaining the benefits of the good.

A low voter turnout can be explained by noting that political action is a public good and people who don't vote can free-ride on those who do.

For a nonrival good like pay-per-view television programs, the private market will lead to:

If the market supply and demand curves for a common resource include all costs and benefits, the common resource will:

An artificially scarce good is a good or service for which exclusion is _ and which is _ in consumption.

An e-book is similar to a published book in that it is _, but it is also similar to national defense in that it is _.

When the market does NOT result in an efficient allocation of scarce resources, economists say there has been:

For a public good, the marginal social benefit:

Artificially scarce goods are inefficiently consumed because the market price is zero.

A good is most likely to be artificially scarce if:

For a public good, the marginal social benefit will be higher than any individual's marginal benefit of consumption.

A good is excludable if nonpayers can be prevented from consuming it.

Public goods should be provided to the point at which the marginal cost of production equals:

The best example of a private good is:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 17: Public Goods Common Resources

For a public good, nonpayers _____ excluded from obtaining the benefits of the good.

A low voter turnout can be explained by noting that political action is a public good and people who don't vote can free-ride on those who do.

For a nonrival good like pay-per-view television programs, the private market will lead to:

If the market supply and demand curves for a common resource include all costs and benefits, the common resource will:

An artificially scarce good is a good or service for which exclusion is _____ and which is _____ in consumption.

An e-book is similar to a published book in that it is _____, but it is also similar to national defense in that it is _____.

When the market does NOT result in an efficient allocation of scarce resources, economists say there has been:

For a public good, the marginal social benefit:

Artificially scarce goods are inefficiently consumed because the market price is zero.

A good is most likely to be artificially scarce if:

For a public good, the marginal social benefit will be higher than any individual's marginal benefit of consumption.

A good is excludable if nonpayers can be prevented from consuming it.

Public goods should be provided to the point at which the marginal cost of production equals:

The best example of a private good is:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

An artificially scarce good is a good or service for which exclusion is _ and which is _ in consumption.

An e-book is similar to a published book in that it is _, but it is also similar to national defense in that it is _.