Question 1

If the local government in Parksville,British Columbia,decided to put on a public Canada Day parade,how would the parade be classified

Accepted Answer

A)  excludable
B)  rival in consumption
C)  a public good
D)  a common resourceE) C) and D)
F) B) and D)

Question 2

When does the Tragedy of the Commons result

Accepted Answer

A)  when a good is rival in consumption and not excludable
B)  when a good is excludable and not rival in consumption
C)  when a good is both rival in consumption and excludable
D)  when a good is neither rival in consumption nor excludableE) A) and D)
F) C) and D)

Question 3

Can the market system lead to an efficient outcome in a market for a good like ice cream cones

Accepted Answer

A)  no, because based on the market system alone, an inefficient number of ice cream cones will be produced
B)  yes, because at the market equilibrium, the sum of producer surplus and consumer surplus is minimized
C)  yes, because price adjusts to determine the supply and demand of the ice cream cones and determine the market equilibrium
D)  no, because the price established in the market will not reflect the true value of ice cream cones to consumersE) A) and B)
F) A) and C)

Question 4

"What is common to many is taken least care of,for all men have greater regard for what is their own than for what they possess in common with others." To whom is this statement attributed

Accepted Answer

A)  Karl Marx
B)  Aristotle
C)  Pericles
D)  Adam SmithE) None of the above
F) B) and C)

Question 5

Suppose that Martin owns a lighthouse and Lewis owns a nearby port.Martin's lighthouse benefits only those ships that enter Lewis's port.What is the preferred method to combat the free-rider problem

Accepted Answer

A)  Martin charges a fee for all ships that pass by Lewis's port.
B)  Martin charges Lewis a usage fee.
C)  Martin can exclude Lewis's port from benefiting from the lighthouse by simply turning the power off.
D)  Martin sells his lighthouse.E) A) and B)
F) B) and C)

Question 6

What is the greatest difficulty with cost-benefit analysis of a public project

Accepted Answer

A)  determining whether government revenue is sufficient to cover the cost of the project
B)  determining whom to award the project contract
C)  determining the cost of the project
D)  determining the value or benefit of the projectE) B) and D)
F) A) and D)

Question 7

How are private goods classified

Accepted Answer

A)  as both excludable and nonrival in consumption
B)  as both nonexcludable and rival in consumption
C)  as both excludable and rival in consumption
D)  as both nonexcludable and nonrival in consumptionE) C) and D)
F) A) and D)

Question 8

If a road is congested,what would use of that road by an additional person lead to

Accepted Answer

A)  a negative externality
B)  a positive externality
C)  a club good problem
D)  a free-rider problem with rush hour drivers stuck in trafficE) A) and B)
F) B) and C)

Question 9

In the Tragedy of the Commons,joint action among the individual citizens would be necessary to solve their common resource problem if government did not intervene.

Accepted Answer

A) True 
 B)False

Question 10

If the use of a common resource is not regulated,what happens

Accepted Answer

A)  It cannot be used by anyone.
B)  The economy will end up with too much of a good thing.
C)  It becomes a private good.
D)  It will be overused.E) All of the above
F) B) and C)

Question 11

One possible solution to the problem of protecting a common resource is to convert that resource to a private good.

Accepted Answer

A) True 
 B)False

Question 12

Why does the government provide public goods

Accepted Answer

A)  Private markets would not produce any of the good.
B)  Private markets would not produce the efficient quantity of the good.
C)  Private markets would charge too high a price for the good.
D)  Private markets produce public goods less efficiently than the government.E) None of the above
F) A) and B)

Question 13

What happens when goods are available in an economy free of charge

Accepted Answer

A)  Market forces cannot be used to allocate resources.
B)  Too many of these goods will be produced since there is no cost of production.
C)  The product will have no value for the majority of the population.
D)  Goods are not available in market economies free of charge.E) All of the above
F) None of the above

Question 14

Why does the Tragedy of the Commons occur

Accepted Answer

A)  A common resource is rival in consumption.
B)  A common resource is underutilized.
C)  Crimes are committed in public places.
D)  Common resources are subject to exclusionary rules.E) A) and C)
F) C) and D)

Question 15

Why is national defence a classic example of a public good

Accepted Answer

A)  Private security services are very difficult to find.
B)  It is difficult to exclude people from receiving the benefits from national defence once it is provided.
C)  Everyone agrees that some level of national defence is important, but only the government knows the optimal amount.
D)  If individuals were required to purchase their own armoured tank, there wouldn't be enough tanks to go around.E) B) and C)
F) A) and B)

Question 16

Why is cost-benefit analysis important in determining the role of government in our economy

Accepted Answer

A)  Cost-benefit analysis helps government identify all goods in which benefits exceed costs.
B)  Cost-benefit analysis identifies the possible gains to society from government provision of a particular good.
C)  Cost-benefit analysis identifies the private good markets from the public good markets.
D)  Cost-benefit analysis identifies market failure.E) All of the above
F) C) and D)

Question 17

Why does the market not provide national defence

Accepted Answer

A)  It is impossible to prevent any single person from enjoying the benefit of national defence.
B)  The fixed cost of national defence is too high.
C)  The necessary resources for national defence are not available in the private sector.
D)  Private sectors are not willing to pay for it.E) B) and D)
F) All of the above

Question 18

When might a lighthouse be considered a private good

Accepted Answer

A)  if there is a second lighthouse nearby, thus preventing a monopoly
B)  if the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse
C)  if ships are able to enjoy the benefits of the lighthouse without paying for the benefit
D)  if a lighthouse benefits many ship captainsE) B) and D)
F) B) and C)

Question 19

What are most goods in the economy

Accepted Answer

A)  club goods
B)  common resources
C)  public goods
D)  private goodsE) B) and C)
F) All of the above

Question 20

As with many public goods,determining the appropriate level of government support for the production of general knowledge is difficult.Why

Accepted Answer

A)  Benefits are hard to measure.
B)  Patents correct for an unknown portion of the externality.
C)  Members of Parliament are often experts in the sciences.
D)  The costs always exceed the benefits.E) A) and D)
F) A) and C)

Exam 11: Public Goods and Common Resources

If the use of a common resource is not regulated,what happens

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What are most goods in the economy

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If the local government in Parksville,British Columbia,decided to put on a public Canada Day parade,how would the parade be classified

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Why is national defence a classic example of a public good

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How are private goods classified

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If a road is congested,what would use of that road by an additional person lead to

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When might a lighthouse be considered a private good

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"What is common to many is taken least care of,for all men have greater regard for what is their own than for what they possess in common with others." To whom is this statement attributed

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Why does the Tragedy of the Commons occur

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What happens when goods are available in an economy free of charge

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Why does the market not provide national defence

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In the Tragedy of the Commons,joint action among the individual citizens would be necessary to solve their common resource problem if government did not intervene.

Correct AnswerverifiedShow Answer

Suppose that Martin owns a lighthouse and Lewis owns a nearby port.Martin's lighthouse benefits only those ships that enter Lewis's port.What is the preferred method to combat the free-rider problem

Correct AnswerverifiedShow Answer

Why is cost-benefit analysis important in determining the role of government in our economy

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What is the greatest difficulty with cost-benefit analysis of a public project

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When does the Tragedy of the Commons result

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Why does the government provide public goods

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Can the market system lead to an efficient outcome in a market for a good like ice cream cones

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As with many public goods,determining the appropriate level of government support for the production of general knowledge is difficult.Why

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One possible solution to the problem of protecting a common resource is to convert that resource to a private good.

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