Question 1

The principle of minimum differentiation describes a tendency of competitors to

Accepted Answer

A)  lower price. 
B)  offer similar products or policies. 
C)  decrease the quantity of goods available. 
D)  offer public goods for sale. 
E)  free ride. 
A)  lower price. 
B)  offer similar products or policies. 
C)  decrease the quantity of goods available. 
D)  offer public goods for sale. 
E)  free ride.

Question 2

If the two political parties propose similar or identical policies,they are following the principle of

Accepted Answer

A)  rational ignorance. 
B)  inefficient overprovision. 
C)  free riding. 
D)  minimum differentiation. 
E)  the commons. 
A)  rational ignorance. 
B)  inefficient overprovision. 
C)  free riding. 
D)  minimum differentiation. 
E)  the commons.

Question 3

Which of the following is an example of a pure private good?

Accepted Answer

A)  national defense 
B)  the Florida State Turnpike, a non-congested toll highway 
C)  Lake Erie 
D)  the Metropolitan Museum of Art in New York City 
E)  the new heat pump your neighbor bought for her house 
A)  national defense 
B)  the Florida State Turnpike, a non-congested toll highway 
C)  Lake Erie 
D)  the Metropolitan Museum of Art in New York City 
E)  the new heat pump your neighbor bought for her house

Question 4

One reason the size of the government is large is because

Accepted Answer

A)  people's demand for private goods grows faster than their demand for public goods. 
B)  politicians do not support spending on things such as education and public health. 
C)  voters' incomes grow, thereby causing an increased demand for private goods. 
D)  budget maximization by bureaucrats and rational ignorance by voters lead to overproduction. 
E)  rational ignorance by politicians who follow the principle of minimum differentiation. 
A)  people's demand for private goods grows faster than their demand for public goods. 
B)  politicians do not support spending on things such as education and public health. 
C)  voters' incomes grow, thereby causing an increased demand for private goods. 
D)  budget maximization by bureaucrats and rational ignorance by voters lead to overproduction. 
E)  rational ignorance by politicians who follow the principle of minimum differentiation.

Question 5

Which of the following is true?
i.A common resource is a resource that is nonrival and nonexcludable.
ii.Issuing individual transferable quotas (ITQ)means that for users of common resources,the marginal cost plus the price of the ITQ equals the marginal social cost.
iii.In an unregulated market,a common resource is used to the point at which marginal private benefit equals marginal cost.

Accepted Answer

A)  only i 
B)  only ii 
C)  only iii 
D)  i and ii 
E)  ii and iii 
A)  only i 
B)  only ii 
C)  only iii 
D)  i and ii 
E)  ii and iii

Question 6

$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Tons of } \
\text { fish }
\end{array} & \begin{array} { c } 
\text { Marginal social } \
\text { benefit } \
\text { (dollars per hour) }
\end{array} \
\hline 100 & 700 \
\hline 200 & 600 \
\hline 300 & 500 \
\hline 400 & 400 \
\hline 500 & 300 \
\hline 600 & 200 \
\hline
\end{array}$$
-The table above shows the marginal social benefit of fishing in Mediterranean Sea.The marginal private cost of operating a fishing boat is the same for all producers,$300 per hour.The marginal social cost is twice the marginal private cost.If the government sets a production quota,to have the efficient quantity of fish caught,the quote should equal ________ tons of fish.

Accepted Answer

A)  100 
B)  200 
C)  300 
D)  400 
E)  500 
A)  100 
B)  200 
C)  300 
D)  400 
E)  500

Question 7

For a common resource,the marginal private benefit of the resource is

Accepted Answer

A)  greater than the marginal social benefit. 
B)  equal to the marginal social benefit. 
C)  less than the marginal social benefit. 
D)  not comparable to the marginal social benefit. 
E)  not defined because the resource is nonexcludable. 
A)  greater than the marginal social benefit. 
B)  equal to the marginal social benefit. 
C)  less than the marginal social benefit. 
D)  not comparable to the marginal social benefit. 
E)  not defined because the resource is nonexcludable.

Question 8

One important feature that distinguishes a public good from a private good is that

Accepted Answer

A)  only the government can produce public goods. 
B)  it is impossible to prevent a person from enjoying the benefits from a public good. 
C)  if you pay for a unit of a public good, you are guaranteed to be the sole consumer. 
D)  if you consume a unit of a public good, there is one unit less for someone else. 
E)  Both answers C and D are correct. 
A)  only the government can produce public goods. 
B)  it is impossible to prevent a person from enjoying the benefits from a public good. 
C)  if you pay for a unit of a public good, you are guaranteed to be the sole consumer. 
D)  if you consume a unit of a public good, there is one unit less for someone else. 
E)  Both answers C and D are correct.

Question 9

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { (number of missile } \
\text { gun boats) }
\end{array} & \begin{array} { c } 
\text { Paul's marginal } \
\text { benefit } \
\text { (millions of dollars) }
\end{array} & \begin{array} { c } 
\text { Paula's marginal } \
\text { benefit } \
\text { (millions of dollars) }
\end{array} \
\hline 1 & 6 & 10 \
2 & 4 & 8 \
3 & 2 & 6 \
4 & 1 & 3 \
\hline
\end{array}$$
-Paul and Paula are the only members of society.The table above gives their marginal benefits from missile gunboats,a public good.Determine the marginal benefit to society of the fourth missile gunboat.

Accepted Answer

A)  $8 million 
B)  $4 million 
C)  $2 million 
D)  $1 million 
E)  $40 million 
A)  $8 million 
B)  $4 million 
C)  $2 million 
D)  $1 million 
E)  $40 million

Question 10

A good is nonrival if

Accepted Answer

A)  only the government can produce it. 
B)  nobody can be excluded from enjoying the benefits of the good. 
C)  when you pay for the good, you are guaranteed to be the sole consumer. 
D)  when you consume a unit, you have not decreased the amount left for consumption by other people. 
E)  anybody can be excluded from enjoying the benefits of the good. 
A)  only the government can produce it. 
B)  nobody can be excluded from enjoying the benefits of the good. 
C)  when you pay for the good, you are guaranteed to be the sole consumer. 
D)  when you consume a unit, you have not decreased the amount left for consumption by other people. 
E)  anybody can be excluded from enjoying the benefits of the good.

Question 11

________ is the decision not to acquire information because the marginal cost of doing so exceeds the marginal benefit.

Accepted Answer

A)  Rational ignorance 
B)  The principle of minimum differentiation 
C)  A free rider 
D)  Consumer ignorance 
E)  The tragedy of the commons 
A)  Rational ignorance 
B)  The principle of minimum differentiation 
C)  A free rider 
D)  Consumer ignorance 
E)  The tragedy of the commons

Question 12

How does the principle of minimum differentiation relate to the free-rider problem?

Accepted Answer

The free-rider problem requires that the

Question 13

A good is rival if

Accepted Answer

A)  it has substitutes. 
B)  it can be consumed by many people simultaneously. 
C)  it is excludable. 
D)  consumption by one person decreases the quantity available for another person. 
E)  it has no complements. 
A)  it has substitutes. 
B)  it can be consumed by many people simultaneously. 
C)  it is excludable. 
D)  consumption by one person decreases the quantity available for another person. 
E)  it has no complements.

Question 14

A professional football game played in a completely full stadium is NOT a public good because it is

Accepted Answer

A)  nonexcludable and nonrival. 
B)  excludable and nonrival. 
C)  excludable and rival. 
D)  nonexcludable and rival. 
E)  not supplied by the government. 
A)  nonexcludable and nonrival. 
B)  excludable and nonrival. 
C)  excludable and rival. 
D)  nonexcludable and rival. 
E)  not supplied by the government.

Question 15

Which of the following is a correct statement?

Accepted Answer

A)  To obtain the economy's marginal benefit for a public good, marginal benefits of all individuals at each quantity have to be added. 
B)  To obtain the economy's marginal benefit for a public good, the quantity that all individuals are willing to buy at each price must be added. 
C)  To obtain the economy's marginal benefit curve for a public good, we sum the individual demand curves horizontally. 
D)  Because public goods are nonexcludable, the economy's marginal benefit curve for a public good is the same as its marginal cost curve. 
E)  None of the above answers is correct. 
A)  To obtain the economy's marginal benefit for a public good, marginal benefits of all individuals at each quantity have to be added. 
B)  To obtain the economy's marginal benefit for a public good, the quantity that all individuals are willing to buy at each price must be added. 
C)  To obtain the economy's marginal benefit curve for a public good, we sum the individual demand curves horizontally. 
D)  Because public goods are nonexcludable, the economy's marginal benefit curve for a public good is the same as its marginal cost curve. 
E)  None of the above answers is correct.

Question 16

$\begin{array}{c}
\begin{array}{c}
\text { Quantity}\
\text { (lights per block)}\
\hline0\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text { Marginal benefit}\
\text { (dollars per year)}\
\hline0\
14\
12\
10\
8\
6\
4 
\end{array}
\begin{array}{c}
\text { Marginal cost}\
\text { (dollars per year)}\
\hline0\
4\
7\
10\
13\
16\
19
\end{array}
\end{array}$

-The table above provides information about the marginal cost and marginal benefit of streetlights,which are a public good.
a.What quantity would a private company provide? Why?
b.What is the efficient quantity?

Accepted Answer

a.Street lights are a public good,so a p

Question 17

When a production quota is used to remedy the tragedy of the commons,then

Accepted Answer

A)  the quota is set so that use of the resource is where marginal private benefit equals marginal private cost. 
B)  the quota is set so that use of the resource is where marginal private benefit equals marginal social benefit. 
C)  the market equilibrium, but not the efficient outcome, is achieved. 
D)  users of the resource have an incentive to cheat on the quota. 
E)  previous users of the resource are given the incentive to avoid use of the resource. 
A)  the quota is set so that use of the resource is where marginal private benefit equals marginal private cost. 
B)  the quota is set so that use of the resource is where marginal private benefit equals marginal social benefit. 
C)  the market equilibrium, but not the efficient outcome, is achieved. 
D)  users of the resource have an incentive to cheat on the quota. 
E)  previous users of the resource are given the incentive to avoid use of the resource.

Question 18

A public good is ________ and ________.

Accepted Answer

A)  rival; excludable 
B)  rival; nonexcludable 
C)  nonrival; excludable 
D)  nonrival; nonexcludable 
E)  cheap; available 
A)  rival; excludable 
B)  rival; nonexcludable 
C)  nonrival; excludable 
D)  nonrival; nonexcludable 
E)  cheap; available

Question 19

A private good is ________ and ________.

Accepted Answer

A)  rival; excludable 
B)  rival; nonexcludable 
C)  nonrival; excludable 
D)  nonrival; nonexcludable 
E)  scarce; expensive 
A)  rival; excludable 
B)  rival; nonexcludable 
C)  nonrival; excludable 
D)  nonrival; nonexcludable 
E)  scarce; expensive

Question 20

What is the free-rider problem and with what is it associated?

Accepted Answer

The free-rider problem is associated wit

The principle of minimum differentiation describes a tendency of competitors to

If the two political parties propose similar or identical policies,they are following the principle of

Which of the following is an example of a pure private good?

One reason the size of the government is large is because

For a common resource,the marginal private benefit of the resource is

One important feature that distinguishes a public good from a private good is that

A good is nonrival if

________ is the decision not to acquire information because the marginal cost of doing so exceeds the marginal benefit.

How does the principle of minimum differentiation relate to the free-rider problem?

A good is rival if

A professional football game played in a completely full stadium is NOT a public good because it is

Which of the following is a correct statement?

When a production quota is used to remedy the tragedy of the commons,then

A public good is and .

A private good is and .

What is the free-rider problem and with what is it associated?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 11: Public Goods and Common Resources

The principle of minimum differentiation describes a tendency of competitors to

If the two political parties propose similar or identical policies,they are following the principle of

Which of the following is an example of a pure private good?

One reason the size of the government is large is because

For a common resource,the marginal private benefit of the resource is

One important feature that distinguishes a public good from a private good is that

A good is nonrival if

________ is the decision not to acquire information because the marginal cost of doing so exceeds the marginal benefit.

How does the principle of minimum differentiation relate to the free-rider problem?

A good is rival if

A professional football game played in a completely full stadium is NOT a public good because it is

Which of the following is a correct statement?

When a production quota is used to remedy the tragedy of the commons,then

A public good is ________ and ________.

A private good is ________ and ________.

What is the free-rider problem and with what is it associated?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

A public good is and .

A private good is and .