Question 1

Broadcast television is an example of:

Accepted Answer

A) a collective good provided by the government. 
B) a private good provided by private firms. 
C) a private good provided by the government. 
D) a public good provided by private firms. 
A) a collective good provided by the government. 
B) a private good provided by private firms. 
C) a private good provided by the government. 
D) a public good provided by private firms.

Question 2

Aaron's neighbor Cliff keeps his front yard well-manicured and plants beautiful flowers which Aaron enjoys. If local law prevents Cliff from fencing his yard, the beauty of Cliff's front yard is:

Accepted Answer

A) nonrival. 
B) a private good. 
C) nonexcludable. 
D) both nonrival and nonexcludable. 
A) nonrival. 
B) a private good. 
C) nonexcludable. 
D) both nonrival and nonexcludable.

Question 3

The government subsidizes education because:

Accepted Answer

A) it is a pure public good. 
B) private firms will not provide education. 
C) the government can provide a better education than can private firms. 
D) education is thought to have positive externalities. 
A) it is a pure public good. 
B) private firms will not provide education. 
C) the government can provide a better education than can private firms. 
D) education is thought to have positive externalities.

Question 4

When someone buys a movie on DVD, the DVD is a ________ good.

Accepted Answer

A) public 
B) private 
C) collective 
D) commons 
A) public 
B) private 
C) collective 
D) commons

Question 5

The marginal cost of providing another viewer with access to HBO is zero. Since only people who pay for HBO can watch it:

Accepted Answer

A) fewer than the socially optimal number of people will have access to HBO. 
B) more than the socially optimal number of people will have access HBO. 
C) HBO will not be profitable in the long run. 
D) access to HBO is nonexcludable. 
A) fewer than the socially optimal number of people will have access to HBO. 
B) more than the socially optimal number of people will have access HBO. 
C) HBO will not be profitable in the long run. 
D) access to HBO is nonexcludable.

Question 6

Goods like Wi-Fi networks that are nonrival but excludable are known as:

Accepted Answer

A) pure public goods. 
B) private goods. 
C) commons goods. 
D) collective goods. 
A) pure public goods. 
B) private goods. 
C) commons goods. 
D) collective goods.

Question 7

If the popular television show The Bachelor is shown on pay-per-view television every Monday at 9pm, then the demand curve for each episode is given below.   If each episode were shown for free, total economic surplus would be ________.

Accepted Answer

A) $4,000 million 
B) $2,000 million 
C) $1,280 million 
D) $720 million 
A) $4,000 million 
B) $2,000 million 
C) $1,280 million 
D) $720 million

Question 8

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C.   If the good shown on the graphs is a public good, and the marginal cost of the 20ᵗʰ unit is $10, then the optimal quantity of the public good is:

Accepted Answer

A) zero. 
B) 20 units 
C) less than 20 units. 
D) greater than 20 units. 
A) zero. 
B) 20 units 
C) less than 20 units. 
D) greater than 20 units.

Question 9

A highway without any tolls between 12am and 5am when there is very little traffic is an example of a ________ good.

Accepted Answer

A) collective 
B) public 
C) private 
D) commons 
A) collective 
B) public 
C) private 
D) commons

Question 10

There are 100 residents in the City of Mos Eisley. Each resident's willingness to pay for an additional acre of parkland (P)depends on the number of acres the City already has (Q), and is given by P = 20 - 0.10Q. If parkland is a public good, and the cost of each acre of parkland is constant and equal to $500, then what's the socially optimal number of acres of parkland in Mos Eisley?

Accepted Answer

A) 520 acres 
B) 185 acres 
C) 150 acres 
D) 0 acres 
A) 520 acres 
B) 185 acres 
C) 150 acres 
D) 0 acres

Question 11

Which of the following is the best example of a pure public good?

Accepted Answer

A) Cable television 
B) A national park 
C) National defense 
D) Education 
A) Cable television 
B) A national park 
C) National defense 
D) Education

Question 12

Consider a town with three residents. The residents' demand curves for various acres of a public park are shown below.   Suppose the city receives a grant that pays one half of the cost of each acre the city buys. If the cost of land is $28 per acre, the optimal park size is

Accepted Answer

A) 8. 
B) 2. 
C) 4. 
D) 6. 
A) 8. 
B) 2. 
C) 4. 
D) 6.

Question 13

If a good can be consumed by one person without reducing its availability to others, then it is a ________ good.

Accepted Answer

A) nonexcludable 
B) pure public 
C) common 
D) nonrival 
A) nonexcludable 
B) pure public 
C) common 
D) nonrival

Question 14

A good or service that is rival but nonexcludable is called a ________, and a good or service that is nonrival but excludable is called a ________.

Accepted Answer

A) public good; private good 
B) commons good; public good 
C) commons good; collective good 
D) public good; collective good 
A) public good; private good 
B) commons good; public good 
C) commons good; collective good 
D) public good; collective good

Question 15

Suppose a private monopolist is supplying a good that is nonrival but excludable. The market demand for the good is P = 24 - 3Q. If the marginal cost of providing this good is zero, but the firm charges $18, then the monopolist will provide ________ units, and the efficient number of units is ________.

Accepted Answer

A) 2; 8 
B) 6; 8 
C) 2; 2 
D) 4; 2 
A) 2; 8 
B) 6; 8 
C) 2; 2 
D) 4; 2

Question 16

The small city of Pleasantville is considering building a public swimming pool that costs $1,000. Each resident's marginal benefit of the swimming pool is shown below. It takes a 4/5 majority to pass any tax measure, and all residents must vote. $$\begin{array} { | l | c | } 
\hline{ \text { Vater } } & \text { Marginal Benefit } \
\hline \text { Kyle } & \$ 420 \
\hline \text { Dylarn } & \$ 360 \
\hline \text { Frar1 } & \$ 350 \
\hline \text { Rorruie } & \$ 190 \
\hline \text { Sarn } & \$ 170 \
\hline
\end{array}$$  
The total social benefit of the swimming pool is:

Accepted Answer

A) $1,490. 
B) $1,000. 
C) $1,590. 
D) $1,120. 
A) $1,490. 
B) $1,000. 
C) $1,590. 
D) $1,120.

Question 17

Clint, Lee and Eli are the only three residents of the village of Fantasma. They are considering whether to construct a hiking trail in the mountains surrounding the village. Because congestion on the trail is unlikely, it would be nonrival. Clint values the trail at $300 per month, Lee values the trail at $100 per month, and Eli values the trail at $80 per month. The cost of building and maintaining the trail is $420 per month. Given this information, it is:

Accepted Answer

A) socially optimal to build the trail. 
B) not socially optimal to build the trail. 
C) only socially optimal to build the trail if the majority of voters are in favor. 
D) not socially optimal to build the trail if it is paid for through taxes. 
A) socially optimal to build the trail. 
B) not socially optimal to build the trail. 
C) only socially optimal to build the trail if the majority of voters are in favor. 
D) not socially optimal to build the trail if it is paid for through taxes.

Question 18

Spike pays $14,000 in taxes and earns $100,000. Ace earns $120,000. If the tax system is progressive, Ace will pay ________ in taxes.

Accepted Answer

A) $15,500. 
B) more than $16,800. 
C) more than $15,500 but less than $16,800. 
D) $16,800. 
A) $15,500. 
B) more than $16,800. 
C) more than $15,500 but less than $16,800. 
D) $16,800.

Question 19

Suppose Stan owns a piece of property with a large lake. Initially, Stan and his family were the only people who swam in the lake. Then Stan started selling tickets to people who wanted to go swimming in the lake. When Stan died, he left the lake and the land it was on to the state, stipulating that the lake be left open to the public for swimming. Due to the lake's remote location, it was never crowded. After Stan died, the lake became a ________ good.

Accepted Answer

A) private 
B) commons 
C) collective 
D) public 
A) private 
B) commons 
C) collective 
D) public

Question 20

MegaCable and Acme are competing for an exclusive contract to provide the city of Dustin with cable television for the next year. The firm that wins the contract will earn an economic profit of $5 million. The contact will be awarded to the firm that spends the most on lobbying. If both firms spend the same amount on lobbying, then the winner will be determined by a coin flip, so each will have a 50 percent chance of winning.  
If both firms refrain from spending anything on lobbying, the expected profit from the contract is:

Accepted Answer

A) $5 million. 
B) $2.5 million. 
C) $2 million. 
D) $1 million. 
A) $5 million. 
B) $2.5 million. 
C) $2 million. 
D) $1 million.

Exam 14: Public Goods and Tax Policy

Broadcast television is an example of:

Aaron's neighbor Cliff keeps his front yard well-manicured and plants beautiful flowers which Aaron enjoys. If local law prevents Cliff from fencing his yard, the beauty of Cliff's front yard is:

The government subsidizes education because:

When someone buys a movie on DVD, the DVD is a ________ good.

The marginal cost of providing another viewer with access to HBO is zero. Since only people who pay for HBO can watch it:

Goods like Wi-Fi networks that are nonrival but excludable are known as:

If the popular television show The Bachelor is shown on pay-per-view television every Monday at 9pm, then the demand curve for each episode is given below. If each episode were shown for free, total economic surplus would be ________.

Suppose the market consists of 3 individuals: Citizen A, Citizen B and Citizen C. If the good shown on the graphs is a public good, and the marginal cost of the 20ᵗʰ unit is $10, then the optimal quantity of the public good is:

A highway without any tolls between 12am and 5am when there is very little traffic is an example of a ________ good.

Which of the following is the best example of a pure public good?

Consider a town with three residents. The residents' demand curves for various acres of a public park are shown below. Suppose the city receives a grant that pays one half of the cost of each acre the city buys. If the cost of land is $28 per acre, the optimal park size is

If a good can be consumed by one person without reducing its availability to others, then it is a ________ good.

A good or service that is rival but nonexcludable is called a ________, and a good or service that is nonrival but excludable is called a ________.

Spike pays $14,000 in taxes and earns $100,000. Ace earns $120,000. If the tax system is progressive, Ace will pay ________ in taxes.

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

A good or service that is rival but nonexcludable is called a , and a good or service that is nonrival but excludable is called a .