31
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30) The figure above shows the marginal cost and marginal benefit of police protection in the
city of Hugo, Oklahoma. Police protection is a public good. If the city of Hugo hires 25 officers,
then
A) marginal cost will exceed marginal benefit, which means that the efficient number of officers
is more than 25.
B) marginal cost will exceed marginal benefit, which means that the efficient number of officers
is less than 25.
C) marginal benefit will exceed marginal cost, which means that Hugo should reduce the number
of officers they hire.
D) marginal benefit equals marginal cost.
E) None of the above answers is correct.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: JC
AACSB: Analytical reasoning
32
Copyright © 2011 Pearson Education, Inc.
31) The figure above shows the marginal cost and marginal benefit of police protection in the
city of Hugo, Oklahoma. Police protection is a public good. If the city of Hugo hires 5 officers,
marginal
A) cost exceeds marginal benefit, so therefore fewer officers should be hired.
B) benefit exceeds marginal cost, so therefore more officers should be hired.
C) benefit equals marginal cost.
D) benefit exceeds marginal cost, so therefore no more officers should be hired.
E) benefit exceeds marginal cost but not by as much as possible, so 5 officers is not the efficient
number to be hired.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: JC
AACSB: Analytical reasoning
32) The figure above shows the marginal cost and marginal benefit of police protection in the
city of Hugo, Oklahoma. Police protection is a public good. The efficient number of officers that
should be hired by the city of Hugo is
A) 15.
B) 25.
C) 10.
D) 0.
E) More than 25 because MB > $0 when 25 officers are hired.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: JC
AACSB: Analytical reasoning
33) The free-rider problem for a public good means that
A) a private market would provide less than the efficient amount of the good.
B) a private market would provide more than the efficient amount of the good.
C) the good is rival.
D) the good is excludable.
E) a private market would provide the efficient amount of the good.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: SA
AACSB: Reflective thinking
33
Copyright © 2011 Pearson Education, Inc.
34) For any individual consumer, free-riding is
A) common for private goods.
B) rational.
C) irrational.
D) impossible for public goods.
E) the same as paying a fair price for the good.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
35) A private, competitive market
A) provides the efficient quantity of a public good.
B) allocates too few resources for a public good.
C) allocates too many resources for a public good.
D) can be relied upon to allocate resources efficiently both for private and public goods.
E) will allocate too many resources for a public good only if free riding occurs.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: SA
AACSB: Reflective thinking
36) Why are private firms unable to produce public goods?
A) Because the government outlaws private firms from producing them.
B) The marginal cost of production is too high for private production to be possible.
C) They can produce these goods but they would not earn any revenue because of the free-rider
problem.
D) The tragedy of the commons means that private firms produce an inefficient amount of public
goods.
E) None of the above answers is correct.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: TS
AACSB: Reflective thinking
34
Copyright © 2011 Pearson Education, Inc.
37) When the United States became involved in the war on terrorism, the marginal benefit of
national defense
A) increased.
B) decreased.
C) did not change.
D) no longer mattered.
E) was subject to free riding.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: MR
AACSB: Reflective thinking
38) The principle of minimum differentiation describes a tendency of competitors to
A) lower price.
B) offer similar products or policies.
C) decrease the quantity of goods available.
D) offer public goods for sale.
E) free ride.
Skill: Level 3: Using models
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
39) Which of the following describes the principle of minimum differentiation?
A) competitors becoming identical to appeal to the largest number of clients or voters
B) minimizing the difference between marginal benefit and marginal cost
C) voters becoming highly informed to elect the best candidate
D) bureaucrats providing the most efficient level of pubic goods provision
E) minimizing the amount of free riding that occurs
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: TS
AACSB: Reflective thinking
35
Copyright © 2011 Pearson Education, Inc.
40) The tendency of political parties to propose identical policies which appeal to the maximum
number of voters is referred to as the principle of
A) maximum differentiation.
B) minimum differentiation.
C) minimum marginal utility.
D) maximum returns.
E) agreement.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: PH
AACSB: Reflective thinking
41) In politics, the principle of minimum differentiation is the tendency toward
A) identical policies to appeal to a minimum number of people.
B) different policies to appeal to a maximum number of people.
C) identical policies to appeal to a maximum number of people.
D) different policies to appeal to a minimum number of people.
E) a minimum number of policies in order to appeal to a maximum number of people.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: JC
AACSB: Reflective thinking
42) When two competitors try to make themselves identical, they are
A) appealing to rational ignorance.
B) trying to appeal to a maximum number of customers.
C) carrying out the principle of minimum differentiation.
D) Both answers B and C are correct.
E) Both answers A and B are correct.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: SA
AACSB: Reflective thinking
36
Copyright © 2011 Pearson Education, Inc.
43) Suppose Burger King builds a new store across the street from a McDonald’s. This is an
example of
A) the free-rider problem.
B) the principle of minimum differentiation.
C) the public provision of a good.
D) a public good.
E) rational ignorance on the part of Burger King.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: CD
AACSB: Reflective thinking
44) Bureaucrats
A) have no incentive to influence the quantity of public goods provided by the government.
B) have no role in the production of public goods.
C) attempt to maximize their budget.
D) make political policy.
E) are generally rationally ignorant about the size of their budget.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
45) Voters typically are concerned only about issues that have a perceptible effect on their well-
being and tend not to care much about other issues. Behavior such as this is known as
A) voter preferences.
B) inefficient overprovision.
C) political competition.
D) rational ignorance.
E) the tragedy of voters.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: TS
AACSB: Reflective thinking
37
Copyright © 2011 Pearson Education, Inc.
46) It is rational for a voter to be ignorant about an issue unless the
A) voter is maximizing his or her well-being.
B) voter is a member of a political party.
C) issue is on the ballot.
D) issue has a perceptible effect on the voter’s well-being.
E) voter worries about the tragedy of the free rider.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
47) When Jean makes a decision NOT to obtain information about an issue that doesn’t have a
perceptible effect on her, Jean’s choice is referred to as
A) rational exuberance.
B) irrational exuberance.
C) irrational intelligence.
D) rational ignorance.
E) the principle of minimum ignorance.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: PH
AACSB: Reflective thinking
48) Rational ignorance is the decision NOT to
A) vote in elections.
B) acquire information because the marginal benefit of doing so exceeds the marginal cost.
C) acquire information because the marginal cost of doing so exceeds the expected marginal
benefit.
D) acquire information because the marginal cost of doing so equals the expected marginal
benefit.
E) follow the principle of minimum differentiation.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: JC
AACSB: Reflective thinking
38
Copyright © 2011 Pearson Education, Inc.
49) The concept of rational ignorance is defined as
A) the decision not to acquire knowledge because of high marginal cost.
B) the deceit by bureaucrats who fool politicians in order to maximize their budgets.
C) politicians not telling the voters the real truth to stay in office.
D) voters being kept from knowing the facts by bureaucrats.
E) bureaucrats not knowing the size of their budget.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: WM
AACSB: Reflective thinking
50) Very few voters know the enormous cost of providing price supports to farmers. As a result,
these voters most likely exhibit
A) the public provision of a good.
B) the principle of minimum differentiation.
C) rational ignorance.
D) the tragedy of the commons.
E) None of the above answers is correct.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: CD
AACSB: Reflective thinking
51) Competition in the political marketplace can result in the efficient provision of a public good
if
A) there is only one political party.
B) voters’ preferences are unknown.
C) benefits are small.
D) voters are well informed and evaluate the alternatives.
E) politicians need to be elected by majority votes.
Skill: Level 3: Using models
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
39
Copyright © 2011 Pearson Education, Inc.
52) Which of the following can bring about an efficient level of public goods being provided by
the government?
A) voters who do not care about benefits and costs of public goods
B) rational ignorance on the part of voters
C) competition between political parties trying to win an election
D) self interest among government bureaucrats
E) free riding on the part of voters
Skill: Level 3: Using models
Section: Checkpoint 10.2
Author: TS
AACSB: Reflective thinking
53) Which of the following is necessary for competition in the political marketplace to result in
the production of the efficient amount of a public good?
A) bureaucrats practice self-interest
B) well informed voters and political parties
C) rational ignorance
D) maximum differentiation of political competitors
E) an absence of any tragedy of the commons
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: TS
AACSB: Reflective thinking
54) The government can be large in size because of
A) inefficient overprovision caused by high voter turnout in elections.
B) efficient overprovision caused by rational voter ignorance.
C) inefficient overprovision caused by rational voter ignorance.
D) efficient overprovision caused by irrational voter ignorance.
E) inefficient overprovision caused by rational politician/bureaucrat ignorance.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: JC
AACSB: Reflective thinking
40
Copyright © 2011 Pearson Education, Inc.
55) One reason the size of the government is large is because
A) people’s demand for private goods grows faster than their demand for public goods.
B) politicians do not support spending on things such as education and public health.
C) voters’ incomes grow, thereby causing an increased demand for private goods.
D) budget maximization by bureaucrats and rational ignorance by voters lead to overproduction.
E) rational ignorance by politicians who follow the principle of minimum differentiation.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: WM
AACSB: Reflective thinking
56) Inefficient overproduction of a public good by the government is
A) the only efficient method of producing public goods.
B) not likely to occur when voters choose rational ignorance.
C) the term used to describe a surplus of a public good.
D) one explanation of why government might be large.
E) not likely to occur if voters are rationally ignorant.
Skill: Level 2: Using definitions
Section: Checkpoint 10.2
Author: SB
AACSB: Reflective thinking
57) When someone enjoys the benefit of a good or service but does not pay for it, that person
A) is a free range consumer.
B) is a free rider.
C) receives no marginal benefit from the good.
D) must be consuming an excludable good.
E) is contributing to the tragedy of the commons.
Skill: Level 1: Definition
Section: Checkpoint 10.2
Author: STUDY GUIDE
AACSB: Reflective thinking