11
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31) To hunters, deer in the woods are an example of a
A) public good.
B) private good.
C) common resource.
D) public resource.
E) natural monopoly.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
32) A mother notices that when she divides brownies equally between her two children and gives
each child her share on a separate plate, the brownies last a long time. But when she gives her
children a plate to share, the brownies are gone pretty quickly. The mother concludes from this
that brownies given on a single plate are
A) excludable but they might either be rival or nonrival.
B) nonexcludable and nonrival.
C) excludable and rival.
D) excludable and nonrival.
E) nonexcludable and rival.
Skill: Level 4: Applying models
Section: Checkpoint 10.1
Author: SA
AACSB: Reflective thinking
33) Which of the following goods is excludable and nonrival?
A) food
B) air
C) the Internet
D) a streetlight
E) a two liter bottle of Mt. Dew
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
12
Copyright © 2011 Pearson Education, Inc.
34) A mixed good is
A) A private good where the production or consumption of that good creates an externality.
B) nonrival and nonexcludable.
C) rival and excludable.
D) nonrival and excludable.
E) rival and nonexcludable.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
35) A good where the production or consumption of that good creates an externality is called a
A) common resource.
B) public good.
C) private good.
D) natural monopoly good.
E) mixed good.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
36) By its definition, a mixed good must
A) create an externality in either its production or consumption.
B) be nonrival.
C) be nonexcludable.
D) be excludable and rival.
E) be excludable and nonrival.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
13
Copyright © 2011 Pearson Education, Inc.
37) Which of the following statements are correct?
i. Externalities can only be costs.
ii. Externalities can only be created by production.
iii. Goods with an externality are called mixed goods.
A) i and ii.
B) ii only.
C) ii and iii.
D) i only.
E) iii only.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
38) Producing paper can create water pollution, a cost that is not paid by the producers or
consumers of paper. In this case, paper is classified as a
A) common resource.
B) public good.
C) private good.
D) natural monopoly good.
E) mixed good.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
39) Samantha plants a beautiful garden that delights people passing by. Samantha’s garden is best
classified as a
A) common resource.
B) public good.
C) private good.
D) natural monopoly good.
E) mixed good.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
14
Copyright © 2011 Pearson Education, Inc.
40) Generating electricity can emit carbon dioxide, which can lead to global warming. In this
case, electricity is a
A) common resource.
B) public good.
C) private good.
D) natural monopoly good.
E) mixed good.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: MR
AACSB: Reflective thinking
41) Externalities
A) can be either benefits or costs.
B) always create extra social costs.
C) always make society better off.
D) cannot be expressed in dollar amounts.
E) are always part of private costs or private benefits.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: TS
AACSB: Reflective thinking
42) A cost that arises from the production or consumption that falls on someone other than the
producer or consumer is called
A) a mixed good.
B) a public choice impact.
C) a positive externality.
D) a negative externality.
E) a private good.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
15
Copyright © 2011 Pearson Education, Inc.
43) A cost or a benefit that arises from the production or consumption that falls on someone
other than the producer or consumer is called
A) an externality.
B) a mixed good.
C) a public choice impact.
D) a public good.
E) a private good.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
44) Evidence of external costs in the production of a product is present if
A) the price of the product is higher than it should be.
B) the production cost increases because of an increase in the minimum wage.
C) non-buyers and/or non-producers of the product experience a loss for which they are not
compensated.
D) buyers refuse to purchase the product.
E) producers pay all of the costs of producing the good or service.
Skill: Level 4: Applying models
Section: Checkpoint 10.1
Author: TS
AACSB: Reflective thinking
45) An example of someone bearing the burden of a negative production externality would be
A) Taylor living downwind from a smelly feedlot where pigs are raised.
B) Jess’s roommate smokes and she doesn’t.
C) Lynna’s neighbors play loud music late at night.
D) All of these are examples someone bearing the burden of a negative production externality.
E) None of these are examples someone bearing the burden of a negative production externality.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
16
Copyright © 2011 Pearson Education, Inc.
46) An example of someone bearing the burden of a negative consumption externality would be
A) Taylor living downwind from a feedlot.
B) LaShawn grows beautiful roses in her garden.
C) Jess’s roommate smokes and she doesn’t.
D) All of these are examples someone bearing the burden of a negative consumption externality.
E) None of these are examples someone bearing the burden of a negative consumption
externality.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
47) An example of a mixed good with an external cost includes
A) electricity generation that produces carbon dioxide emissions that contribute toward global
warming.
B) logging that destroys wildlife habitat.
C) Jess smoking near her non-smoking roommate.
D) noise pollution from aircraft.
E) All of these are examples of mixed goods with external costs.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
48) To ensure all students are protected from getting the flu this year, your school offers free flu
shots. What type of externality exists in this example?
A) Negative consumption externality.
B) Positive consumption externality.
C) Positive production externality.
D) Negative production externality.
E) Neutral externality.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
17
Copyright © 2011 Pearson Education, Inc.
49) Which of the following is NOT an example of a mixed good with an external cost?
A) electricity generation that produces carbon dioxide emissions that contribute toward global
warming.
B) logging that destroys wildlife habitat.
C) Jess smoking near her non-smoking roommate.
D) Ahmed works at a bank and he gets a flu shot each fall.
E) noise pollution from aircraft.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: KG
AACSB: Reflective thinking
50) When use of a good decreases the quantity available for someone else, the good is
A) rival.
B) nonrival.
C) excludable.
D) nonexcludable.
E) a public good.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
51) The fact that Sha’s enjoyment of a sunset on Saint Simon’s Island does not preclude Lou from
enjoying the sunset is an example of
A) a good that is nonrival.
B) a good that is excludable.
C) a private good.
D) the rival nature of consumption.
E) a common resource.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
18
Copyright © 2011 Pearson Education, Inc.
52) A private good is ________ and ________.
A) rival; excludable
B) rival; nonexcludable
C) nonrival; excludable
D) nonrival; nonexcludable
E) scarce; expensive
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
53) If I order a pizza and invite my neighbors to eat it, the pizza is
A) a private good.
B) a common resource.
C) a public good because many people ate it.
D) either a common resource or a public good depending on whether it is overused.
E) produced by a natural monopoly.
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
54) A public good is ________ and ________.
A) rival; excludable
B) rival; nonexcludable
C) nonrival; excludable
D) nonrival; nonexcludable
E) cheap; available
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
19
Copyright © 2011 Pearson Education, Inc.
55) A public good
A) can only be consumed by one person at a time.
B) can be consumed simultaneously by many people.
C) is any good provided by a company owned by a member of the public.
D) is any good provided by government.
E) is both rival and excludable.
Skill: Level 1: Definition
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
56) Which of the following is the best example of a public good?
A) national defense
B) a Ford Thunderbird
C) Yosemite national park
D) a Mountain Dew
E) satellite radio
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
57) Which of the following is the best example of a common resource?
A) national defense
B) a Ford Thunderbird
C) Yosemite national park
D) a can of Mountain Dew
E) a cable television network
Skill: Level 2: Using definitions
Section: Checkpoint 10.1
Author: STUDY GUIDE
AACSB: Reflective thinking
20
Copyright © 2011 Pearson Education, Inc.
10.2 Public Goods and the Free-Rider Problem
1) The free-rider problem exists because
A) private goods or services cause some people to want to take them for free.
B) some goods or services are excludable and cause envy for those who don’t have them.
C) some goods or services that are rival and leave some people without them.
D) people cannot be excluded from consuming public goods even if they don’t pay for them.
E) people must all consume the same public good and so everyone wants to pay for it.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: WM
AACSB: Reflective thinking
2) The free-rider problem is associated with
A) public goods.
B) private goods.
C) common resources.
D) any type of good.
E) natural monopolies.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
3) Public goods create a free-rider problem because
A) only people who pay for the good or service can enjoy the good or service.
B) people do not want to consume public goods.
C) the good or service is rival in nature.
D) the good or service is excludable.
E) people can enjoy the good or service no matter whether or not they pay for it.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: PH
AACSB: Reflective thinking