Question 1

Colleges and universities solicit their alumni for donations that go toward the operation and advancement of the college. How does this present a potential free-rider problem? How can colleges and universities attempt to lessen the free-rider problem and increase alumni contributions?

Accepted Answer

The answer of Colleges and universities solicit their alumni for...

Question 2

DeVonda owns a music store. One night, vandals broke her store's front window. DeVonda called the police, and the police investigated the crime. The police services that DeVonda used are best described as a(n):

Accepted Answer

A)  private good. 
B)  public good. 
C)  artificially scarce good. 
D)  common resource.

Question 3

Use the following to answer questions: 
-(Table: Street Cleanings) Look at the table Street Cleanings. What is the marginal social benefit for Peter and Wendy together when the number of street cleanings per month increases from 4 to 5?

Accepted Answer

A)  $30 
B)  $60 
C)  $6 
D)  $15

Question 4

The problem with public goods is similar to the problem with positive externalities: the marginal social benefit exceeds any individual's marginal benefit.

Accepted Answer

A) True 
 B)False

Question 5

You work in an office and one of your coworkers has announced his retirement. You have offered to purchase the retirement gift, so you place a collection jar in the lunch room for anonymous donations to help pay for the gift. After a week you find very little money in the jar, so you end up paying for a large share of the retirement gift. You are the victim of the _____ problem.

Accepted Answer

A)  common resource 
B)  private good 
C)  overuse of a common resource 
D)  free-rider

Question 6

Assigning property rights helps to correct the problems associated with common resources:

Accepted Answer

A)  because it allows property owners to exclude users and to manage the resource more efficiently. 
B)  because it allows the government to determine the amount that would lead to the socially optimal amount. 
C)  because it makes the good nonrival in consumption. 
D)  and therefore allows the market to better assess the marginal social benefits.

Question 7

Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest bluefin tuna as the schools migrate through their national waters. The schools of bluefin tuna are best described as:

Accepted Answer

A)  a private good. 
B)  a public good. 
C)  an artificially scarce resource. 
D)  a common resource.

Question 8

A city government engages in cost-benefit analysis when it estimates the social costs and social benefits to provide trash collection services.

Accepted Answer

A) True 
 B)False

Question 9

Use the following to answer questions:
Figure: Market Failure 
-(Figure: Market Failure) In the figure Market Failure, if production in this competitive market is at quantity E:

Accepted Answer

A)  marginal benefit is equal to marginal cost. 
B)  marginal benefit is less than marginal cost. 
C)  marginal benefit is greater than marginal cost. 
D)  price is equal to marginal cost and greater than marginal benefit.

Question 10

If left to the private market, the amount of police protection provided in a city would be _____ than it is now, and free riders would pay _____ for police protection.

Accepted Answer

A)  more; more 
B)  more; nothing 
C)  less; nothing 
D)  less; a higher price

Question 11

The best example of a public good is:

Accepted Answer

A)  a court of law. 
B)  clothing. 
C)  food. 
D)  a state university.

Question 12

Television programs are nonrival because:

Accepted Answer

A)  the supplier cannot prevent consumption by people who do not pay for it. 
B)  more than one person can consume the same unit of the good at the same time. 
C)  individuals ignore the effect of their use on the amount of the resource remaining for others. 
D)  the market suffers from inefficiently low consumption.

Question 13

Public goods are NOT sold in efficient quantities in the marketplace because:

Accepted Answer

A)  once supplied to a buyer, they can be made available at no cost to someone else. 
B)  the more one person has, the less another person has. 
C)  they are usually so costly that only the wealthy can afford them. 
D)  they are usually very poor quality goods.

Question 14

Consider an economy with just two citizens. If Sanjay's marginal benefit from mosquito control is $10 and Anjuli's marginal benefit is $25, then the optimal level of a public good like mosquito control occurs when the marginal cost of mosquito control is:

Accepted Answer

A)  $25.00. 
B)  $17.50. 
C)  $10.00. 
D)  $35.00.

Question 15

Use the following to answer questions:
Scenario: Ben and Nick
Ben and Nick are the only members of a community. They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known. In addition, the marginal social cost (MSC) of the public good is known and is constant. 
-(Scenario: Ben and Nick) Look at the figure and scenario Ben and Nick. Q4:

Accepted Answer

A)  is the socially optimal level of provision of the public good. 
B)  is equal to P4 + P3 in marginal social benefits. 
C)  represents an amount at which the MSB is greater than the MSC. 
D)  will not be produced, since neither Ben nor Nick finds any benefit in it at this level.

Question 16

A key element that a public good displays is:

Accepted Answer

A)  overproduction. 
B)  rival consumption. 
C)  payment through charitable contributions. 
D)  nonexclusion.

Question 17

The efficient level of provision of a public good is the level at which its marginal social benefit is equal to the marginal social cost of its production.

Accepted Answer

A) True 
 B)False

Question 18

The best example of a public good is:

Accepted Answer

A)  legal services. 
B)  national defense. 
C)  a municipal library. 
D)  cable television programming.

Question 19

If the market produces an efficient level of a good, then we know that the good must be _____ and _____ in consumption.

Accepted Answer

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

Question 20

Use the following to answer questions:
Scenario: Alexander and Vanessa
Alexander and Vanessa benefit from scientific research. Alexander's marginal private benefit from such research is given by the equation P = 200 - Q, where Q refers to the amount of research undertaken and P is the price Alexander is willing to pay for such research. Vanessa's marginal private benefit from such research is given by the equation P = 100 - Q. The marginal social cost of engaging in such research is constant at $100.
-(Scenario: Alexander and Vanessa) Given the information in the scenario Alexander and Vanessa, what is the socially optimal amount of scientific research for this economy?

Accepted Answer

A)  60 
B)  300 
C)  100 
D)  200

Exam 17: Public Goods Common Resources

Colleges and universities solicit their alumni for donations that go toward the operation and advancement of the college. How does this present a potential free-rider problem? How can colleges and universities attempt to lessen the free-rider problem and increase alumni contributions?

DeVonda owns a music store. One night, vandals broke her store's front window. DeVonda called the police, and the police investigated the crime. The police services that DeVonda used are best described as a(n) :

Use the following to answer questions: -(Table: Street Cleanings) Look at the table Street Cleanings. What is the marginal social benefit for Peter and Wendy together when the number of street cleanings per month increases from 4 to 5?

The problem with public goods is similar to the problem with positive externalities: the marginal social benefit exceeds any individual's marginal benefit.

Assigning property rights helps to correct the problems associated with common resources:

Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest bluefin tuna as the schools migrate through their national waters. The schools of bluefin tuna are best described as:

A city government engages in cost-benefit analysis when it estimates the social costs and social benefits to provide trash collection services.

Use the following to answer questions: Figure: Market Failure -(Figure: Market Failure) In the figure Market Failure, if production in this competitive market is at quantity E:

If left to the private market, the amount of police protection provided in a city would be _ than it is now, and free riders would pay _ for police protection.

The best example of a public good is:

Television programs are nonrival because:

Public goods are NOT sold in efficient quantities in the marketplace because:

Consider an economy with just two citizens. If Sanjay's marginal benefit from mosquito control is $10 and Anjuli's marginal benefit is $25, then the optimal level of a public good like mosquito control occurs when the marginal cost of mosquito control is:

A key element that a public good displays is:

The efficient level of provision of a public good is the level at which its marginal social benefit is equal to the marginal social cost of its production.

The best example of a public good is:

If the market produces an efficient level of a good, then we know that the good must be _ and _ in consumption.