Question 1

The Tragedy of the Commons occurs with whales because:

Accepted Answer

A)  whales are a public good 
B)  whaling is a cruel practice 
C)  whalers often don't have property rights to whales 
D)  the private incentives of the whalers are in line with social incentives 
A)  whales are a public good 
B)  whaling is a cruel practice 
C)  whalers often don't have property rights to whales 
D)  the private incentives of the whalers are in line with social incentives

Question 2

The Tragedy of the Commons will be evident when a growing number of crocodile hunters leads to the loss of crocodiles in many rivers: Possible solutions to this problem include:

Accepted Answer

A)  providing only a limited number of hunting permits to the hunters 
B)  internalising the externality by using crocodile ranches to turn the animals into a private good 
C)  reduce the hunting season for crocodiles 
D)  all of the above could be done 
A)  providing only a limited number of hunting permits to the hunters 
B)  internalising the externality by using crocodile ranches to turn the animals into a private good 
C)  reduce the hunting season for crocodiles 
D)  all of the above could be done

Question 3

Cost-benefit analysis for a private good is facilitated by which of the following facts? (i) buyers of a private good reveal the value they place on a good by the prices they are willing to pay
(ii) a private good cannot be rival
(iii) sellers of a private good are likely to purchase inputs in regulated markets
(iv) sellers of private goods reveal their costs by the prices they are willing to accept

Accepted Answer

A)  (i), (ii), (iii) and (iv) 
B)  (i) and (iv) only 
C)  (ii) and (iii) only 
D)  (i), (ii) and (iv) only 
A)  (i), (ii), (iii) and (iv) 
B)  (i) and (iv) only 
C)  (ii) and (iii) only 
D)  (i), (ii) and (iv) only

Question 4

The private market would not supply the optimal amount of national defence because:

Accepted Answer

A)  private citizens don't value national defence enough to cover the cost of private provision 
B)  no-one has the right to attach a price to it and profit from its use 
C)  private suppliers are unable to produce national defence 
D)  the government would quickly take advantage of the profit opportunity and undersell to the private suppliers 
A)  private citizens don't value national defence enough to cover the cost of private provision 
B)  no-one has the right to attach a price to it and profit from its use 
C)  private suppliers are unable to produce national defence 
D)  the government would quickly take advantage of the profit opportunity and undersell to the private suppliers

Question 5

Anti-poverty campaigns to reduce poverty are considered by their advocates to be:

Accepted Answer

A)  a public good 
B)  necessary as private charity can't solve the problem 
C)  a policy that makes everyone better off 
D)  all of the above 
A)  a public good 
B)  necessary as private charity can't solve the problem 
C)  a policy that makes everyone better off 
D)  all of the above

Question 6

The government developed the patent system so that private inventors could make a reasonable profit from their own inventions.

Accepted Answer

A) True 
 B)False

Question 7

When a good is characterised by non-excludability, it is theoretically possible for the government to:

Accepted Answer

A)  increase the wellbeing of residents by raising taxes to provide the good 
B)  eliminate the free-rider problem 
C)  reach the efficient outcome in spite of private market failure to do s 
D)  do all of the above 
A)  increase the wellbeing of residents by raising taxes to provide the good 
B)  eliminate the free-rider problem 
C)  reach the efficient outcome in spite of private market failure to do s 
D)  do all of the above

Question 8

Common resources get overused typically because:

Accepted Answer

A)  government subsidies encourage users to exploit it 
B)  there isn't enough fish for all the fishing trawlers 
C)  users ignore the externality they impose on others 
D)  common resources are excludable and rival 
A)  government subsidies encourage users to exploit it 
B)  there isn't enough fish for all the fishing trawlers 
C)  users ignore the externality they impose on others 
D)  common resources are excludable and rival

Question 9

Allowing people to farm American alligators will not maintain the species' population.

Accepted Answer

A) True 
 B)False

Question 10

General scientific knowledge is so valuable, that a private company generating this knowledge would never need a government subsidy to be profitable.

Accepted Answer

A) True 
 B)False

Question 11

When human lives are at stake, should the government approve all projects that would increase safety to human beings?

Accepted Answer

If human life has an infinite

Question 12

Some villages in Papua New Guinea farm rare butterfly species for collectors. What outcome would you expect from this policy?

Accepted Answer

A)  there will be less butterflies because of the Tragedy of the Commons 
B)  there will be more butterflies because people have property rights to the insects 
C)  there will be less butterflies because of the free-rider problem 
D)  none of the above 
A)  there will be less butterflies because of the Tragedy of the Commons 
B)  there will be more butterflies because people have property rights to the insects 
C)  there will be less butterflies because of the free-rider problem 
D)  none of the above

Question 13

The Occupational Safety and Health Administration (OSHA) has determined that 100 workers are exposed to a hazardous chemical used in the production of diet soft drinks. The cost of imposing a regulation that would ban this chemical is $10 million. OSHA has calculated that each person saved by this regulation has a value equal to $10 million. If benefits are exactly equal to costs, what probability is OSHA using to assess the likelihood of a fatality from exposure to this chemical?

Accepted Answer

A)  0.001 
B)  0.01 
C)  0.1 
D)  1.0 
A)  0.001 
B)  0.01 
C)  0.1 
D)  1.0

Question 14

Pollution of water and air resources:

Accepted Answer

A)  can be solved by addressing the positive externalities 
B)  can be viewed as an example of a common resource problem 
C)  are viewed as a bastion of efficient market processes 
D)  can be solved by taxes on swine, called Pigovian taxes 
A)  can be solved by addressing the positive externalities 
B)  can be viewed as an example of a common resource problem 
C)  are viewed as a bastion of efficient market processes 
D)  can be solved by taxes on swine, called Pigovian taxes

Question 15

A lighthouse might be considered a private good if:

Accepted Answer

A)  lighthouses were provided by private charities 
B)  the government taxes ship owners to provide them the lighthouses they need 
C)  the owner of the lighthouse refuses to be subsidised by the government 
D)  the owner of the lighthouse can charge nearby port authorities a fee for the lighthouse service 
A)  lighthouses were provided by private charities 
B)  the government taxes ship owners to provide them the lighthouses they need 
C)  the owner of the lighthouse refuses to be subsidised by the government 
D)  the owner of the lighthouse can charge nearby port authorities a fee for the lighthouse service

Question 16

Because the benefit each citizen receives from having an educated community is a public good:

Accepted Answer

A)  the free-rider problem causes the private market to undersupply education to the community 
B)  the government can potentially help the market reach a socially optimal level of education 
C)  a tax increase to pay for education could potentially make the community better off 
D)  all of the above are true 
A)  the free-rider problem causes the private market to undersupply education to the community 
B)  the government can potentially help the market reach a socially optimal level of education 
C)  a tax increase to pay for education could potentially make the community better off 
D)  all of the above are true

Question 17

Private market failure to optimally allocate common resources is a problem that has only become evident in the last few centuries.

Accepted Answer

A) True 
 B)False

Question 18

If one person's use of a good diminishes another person's enjoyment of it, the good is:

Accepted Answer

A)  rival 
B)  excludable 
C)  normal 
D)  exhaustible 
A)  rival 
B)  excludable 
C)  normal 
D)  exhaustible

Question 19

Suppose fish stocks in a lake are being overfished by fishers. To reduce the overfishing problem the government could:

Accepted Answer

A)  establish a tradable, property right entitlement to the fish. 
B)  pay to have more fish transported to the lake 
C)  increase the length of the fishing season 
D)  do all of the above 
A)  establish a tradable, property right entitlement to the fish. 
B)  pay to have more fish transported to the lake 
C)  increase the length of the fishing season 
D)  do all of the above

Question 20

Fire protection is a good example of a natural monopoly good because:

Accepted Answer

A)  it is non-excludable 
B)  it is rival 
C)  protecting an extra house is unlikely to reduce the protection available to others 
D)  all of the above are true 
A)  it is non-excludable 
B)  it is rival 
C)  protecting an extra house is unlikely to reduce the protection available to others 
D)  all of the above are true

Exam 11: Public Goods and Common Resources

The Tragedy of the Commons occurs with whales because:

The Tragedy of the Commons will be evident when a growing number of crocodile hunters leads to the loss of crocodiles in many rivers: Possible solutions to this problem include:

The private market would not supply the optimal amount of national defence because:

Anti-poverty campaigns to reduce poverty are considered by their advocates to be:

The government developed the patent system so that private inventors could make a reasonable profit from their own inventions.

When a good is characterised by non-excludability, it is theoretically possible for the government to:

Common resources get overused typically because:

Allowing people to farm American alligators will not maintain the species' population.

General scientific knowledge is so valuable, that a private company generating this knowledge would never need a government subsidy to be profitable.

When human lives are at stake, should the government approve all projects that would increase safety to human beings?

Some villages in Papua New Guinea farm rare butterfly species for collectors. What outcome would you expect from this policy?

Pollution of water and air resources:

A lighthouse might be considered a private good if:

Because the benefit each citizen receives from having an educated community is a public good:

Private market failure to optimally allocate common resources is a problem that has only become evident in the last few centuries.

If one person's use of a good diminishes another person's enjoyment of it, the good is:

Suppose fish stocks in a lake are being overfished by fishers. To reduce the overfishing problem the government could:

Fire protection is a good example of a natural monopoly good because:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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