Question 1

An individual is MOST likely to be a free rider when a good is:

Accepted Answer

A)  private. 
B)  nonexcludable. 
C)  nonrival. 
D)  artificially scarce.

Question 2

Wenqin lives in a city that has a huge public rose garden. Residents can stroll through the rose garden, enjoy the scenic vistas, or have a picnic, all without paying a fee. The public rose garden is best described as:

Accepted Answer

A)  rival and excludable. 
B)  nonrival and excludable. 
C)  rival and nonexcludable. 
D)  nonrival and nonexcludable.

Question 3

If a good is subject to the free-rider problem and an inefficiently low level of production when left to the private market, the good must be a(n):

Accepted Answer

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

Question 4

National defense and clean air are similar in that both are _____, but they differ in that national defense is _____, while clean air is not.

Accepted Answer

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

Question 5

The best example of a good that is excludable in consumption is:

Accepted Answer

A)  a park. 
B)  an ocean. 
C)  a bicycle. 
D)  national defense.

Question 6

The efficient price for a good that is nonrival in consumption is necessarily greater than zero.

Accepted Answer

A) True 
 B)False

Question 7

When a good is nonrival in consumption, its most efficient price is:

Accepted Answer

A)  zero. 
B)  determined by producers. 
C)  greater than zero. 
D)  equal to the market price of a similar rival good.

Question 8

Which of the following is the best example of a good whose consumption is NOT excludable?

Accepted Answer

A)  clothing 
B)  ice cream 
C)  a taco 
D)  national defense

Question 9

Which of the following goods BEST fits the characteristics of a private good?

Accepted Answer

A)  a professor giving a lecture in a large classroom 
B)  an ice-cream cone 
C)  fire protection 
D)  disease prevention

Question 10

If the marginal social benefit received from a good is equal to the marginal social cost of production:

Accepted Answer

A)  an increase in production will improve society's well-being. 
B)  a decrease in production will improve society's well-being. 
C)  no change in production can improve society's well-being. 
D)  the market is producing too much of the good.

Question 11

A(n) _____ is nonexcludable and nonrival in consumption.

Accepted Answer

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

Question 12

Clean water in a river is nonexcludable because:

Accepted Answer

A)  it is not possible to 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 their use has on the amount of the resource remaining for others. 
D)  consumption is inefficiently low.

Question 13

Use the following to answer questions:
Figure: Market Failure 
-(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve represents the marginal cost of providing streetlights in a neighborhood that is composed of two people, Ann and Joe. The demand curve represents the marginal benefit that Ann receives from the streetlights. Suppose that Joe's marginal benefit from the streetlights is a constant amount equal to AC. Providing E streetlights 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

Question 14

Use the following to answer questions: 
-(Table: Marginal Benefit from Additional Streetlights) Look at the table Marginal Benefit from Additional Streetlights. Suppose that the marginal cost of installing a streetlight is $6. If Dave had to pay for streetlights on his own, how many streetlights would there be?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3

Question 15

An electronic book is an artificially scarce good because the private market _____ prevent consumption by people who do not pay for it. Further, the same e-book _____ be consumed by more than one person at the same time.

Accepted Answer

A)  can; can 
B)  cannot; cannot 
C)  can; cannot 
D)  cannot; can

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 forces the private-sector firms to face the external cost:

Accepted Answer

A)  the supply curve shifts to the right, from S2 to S1. 
B)  the supply curve shifts to the left, from S1 to S2. 
C)  the supply curve is unaffected. 
D)  price per unit decreases.

Question 17

The free-rider problem refers to:

Accepted Answer

A)  the situation in the Old West when land was largely unfenced and riders had unfettered access to private range land. 
B)  qualifications, or riders, that clients do not request, but which lawyers tend to include in contracts anyway. 
C)  a variation on the phrase "There's no such thing as a free lunch," which is replaced by "There's no such thing as a free ride." 
D)  lack of incentive for consumers to pay for a nonexcludable good.

Question 18

Producers of artificially scarce goods face _____ that are similar to those of natural monopolists; they decline over the relevant range of output.

Accepted Answer

A)  external benefits 
B)  external costs 
C)  total fixed costs 
D)  average total costs

Question 19

A good that is nonexcludable but rival in consumption is a _____ good.

Accepted Answer

A)  common resource 
B)  private 
C)  public 
D)  normal

Question 20

Which of the following goods is most likely a common resource?

Accepted Answer

A)  the Super Bowl 
B)  a public park 
C)  a pair of pants 
D)  the fire department

Exam 17: Public Goods Common Resources