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Public Goods and Common Resources 2795
42.
The difference between specific knowledge and general knowledge is that
a.
the creation of general knowledge is usually more profitable for the creator.
b.
specific knowledge is excludable, while general knowledge is not excludable.
c.
general knowledge is excludable, while specific knowledge is not excludable.
d.
general knowledge is rival in consumption, while specific knowledge is not rival in consumption.
43.
Which of the following is an example of general knowledge, as opposed to specific knowledge
that can be
patented?
a.
the invention of a longer-lasting battery
b.
a mathematical theorem
c.
a method for constructing a high-performance microchip
d.
the chemical formula for an adhesive
44.
Which of the following is not a reason why government agencies subsidize basic research?
a.
The private market devotes too few resources to basic research.
b.
The general knowledge developed through basic research can be used without charge.
c.
The social benefit of additional knowledge is perceived to be greater than the cost of the
subsidies.
d.
The government wants to attract the brightest researchers away from private research firms.
45.
Which of the following statements is not correct?
a.
Medical research can be an example of a public good.
b.
The private market will tend to undersupply public goods.
c.
The free-rider problem occurs when a good is nonexcludable.
d.
All goods provided by the government are public goods.
46.
Private companies will invest in medical research if
a.
they will produce general knowledge.
b.
they will produce a specific product for which they may receive a patent.
c.
there is no government intervention in the market for medical products.
d.
others will benefit from their discoveries.
47.
The U.S. patent system
a.
makes general knowledge excludable.
b.
makes specific, technical knowledge excludable.
c.
creates a disincentive to invent.
d.
Both a and b are correct.
48.
It should not be surprising if the public sector fails to pay for the right amount or right kinds of
basic research
because
a.
basic research is not a public good.
b.
the benefits of basic research are hard to measure.
c.
members of Congress usually have little expertise in science.
d.
Both b and c are correct.
49.
Advocates of antipoverty programs claim that
a.
the government has good information about what people are willing to pay to eliminate poverty.
b.
fighting poverty is a public good.
c.
private sector will incur higher costs than the public sector for these programs.
d.
All of the above are correct.
50.
Advocates of antipoverty programs believe that fighting poverty
a.
can make everyone better off.
b.
is most successfully accomplished by charities.
c.
is most efficiently accomplished by the market.
d.
reduces the well-being of tax payers.
51.
If everyone benefits from helping the poor,
a.
government intervention cannot improve social well-being.
b.
eliminating taxes aimed at redistributing income will make rich people better off.
c.
taxing the wealthy to raise living standards of the poor can potentially make everyone better
off.
d.
private markets can adequately provide charity programs to help the poor, despite free-rider
problems.
52.
Which of the following is a disadvantage of government provision of a public good?
a.
The government lacks information about what people are willing to pay for the good.
b.
The government does not provide enough of any public good.
c.
The private sector can provide all public goods at a lower cost.
d.
None of the above is a disadvantage.
53.
Which of the following is not a characteristic of a public good?
a.
It is not excludable.
b.
It is not diminished or depreciated as additional people consume the good.
c.
Its benefits cannot be withheld from anyone.
d.
Because it is a free good, there is no opportunity cost.
54.
To achieve the optimal provision of public goods, the
a.
market should be allowed to arrive at an equilibrium without government intervention.
b.
government must limit the provision of the goods.
c.
government must tax producers of the goods.
d.
government must either provide the goods or subsidize their production.
55.
Producers have little incentive to produce a public good because
a.
the social benefit is less than the private benefit.
b.
the social benefit is less than the social cost.
c.
there is a free-rider problem.
d.
there is a Tragedy of the Commons.
56.
The government provides public goods because
a.
private markets are incapable of producing these types of goods.
b.
free-riders make it difficult for private markets to supply the socially optimal quantity.
c.
markets are always better off with some government oversight.
d.
external benefits will accrue to private producers.
57.
Too few resources are devoted to the creation of knowledge because profit-seeking firms
a.
undervalue knowledge in their pursuit of revenues.
b.
overuse their patents.
c.
tend to free-ride on the knowledge that others have developed.
d.
tend to rely on existing employee knowledge.
58.
As with many public goods, determining the appropriate level of government support for the
production of general
knowledge is difficult because
a.
patents correct for an unknown portion of the externality.
b.
benefits are hard to measure.
c.
members of Congress are often experts in the sciences.
d.
the costs always exceed the benefits.
59.
Which of the following is a disadvantage of government provision of a public good such as
national defense?
(i) The government does not know the exact willingness of consumers to pay for the
public good.
(ii) The free-rider problem is more likely to occur when the government provides a
public good than when the private sector provides a public good.
(iii) Taxpayers do not agree on the optimal quantity of the public good that the
government should provide.
a.
(i) only
b.
(i) and (ii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
60.
The privately-owned school system in Smalltown has a virtually unlimited capacity. It accepts all
applicants and
operates on both tuition and private donations. Although every resident places
value on having an educated
community, the school's revenues have suffered lately due to a large
decline in private donations from the elderly
population. Since the benefit that each citizen
receives from having an educated community is a public good, which
of the following would not
be correct?
a.
The free-rider problem causes the private market to undersupply education to the community.
b.
The government can potentially help the market reach a socially optimal level of education.
c.
A tax increase to pay for education could potentially make the community better off.
d.
The private market is the best way to supply education.
2804 Public Goods and Common Resources
Table 11-1
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three
residents are
trying to determine how large, in acres, they should build the public park. The table
below shows each resident’s
willingness to pay for each acre of the park.
Acres
Sophia
Amber
Cedric
1
$10
$24
$6
2
8
18
5
3
6
14
4
4
3
8
3
5
1
6
2
6
0
4
1
7
0
2
0
61.
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre. How many acres
should the park be to maximize total surplus from the park in Springfield?
a.
1 acres
b.
2 acres
c.
3 acres
d.
4 acres
62.
Refer to Table 11-1. Suppose the cost to build the park is $9 per acre. How large should the
park be to maximize
total surplus from the park in Springfield?
a.
2 acres
b.
3 acres
c.
4 acres
d.
5 acres
63.
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents
have agreed to split
the cost of building the park equally. If the residents vote to determine the size
of park to build, basing their decision
solely on their own willingness to pay (and trying to
maximize their own surplus), what is the largest park size for
which the majority of residents
would vote “yes?”
a.
0 acres
b.
1 acre
c.
2 acres
d.
3 acres
64.
Refer to Table 11-1. Suppose the cost to build the park is $9 per acre and that the residents
have agreed to split
the cost of building the park equally. If the residents vote to determine the size
of park to build, basing their decision
solely on their own willingness to pay (and trying to
maximize their own surplus), what is the largest park size for
which the majority of residents
would vote “yes?”
a.
1 acre
b.
2 acres
c.
3 acres
d.
4 acres
65.
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents
have agreed to split
the cost of building the park equally. To maximize his own surplus, how many
acres would Cedric like Springfield to
build?
a.
0 acres
b.
1 acre
c.
2 acres
d.
3 acres
66.
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents
have agreed to split
the cost of building the park equally. If the residents decide to build a park
with size equal to the number of acres
that maximizes total surplus from the park, how much total
surplus will Sophia receive?
a.
-$5
b.
-$2
c.
$0
d.
$2
67.
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents
have agreed to split
the cost of building the park equally. If the residents decide to build a park
with size equal to the number of acres
that maximizes total surplus from the park, how much total
surplus will Amber receive?
a.
$0
b. $26
c. $32
d. $56
2808 Public Goods and Common Resources
Table 11-2
Consider a small town with only three families, the Greene family, the Brown family, and the
Black family. The
town does not currently have any streetlights so it is very dark at night. The
three families are considering putting in
streetlights on Main Street and are trying to determine how
many lights to install. The table below shows each
family’s willingness to pay for each streetlight.
Number of
Streetlights
The Greene Family
The Brown Family
The Black Family
1
$340
$480
$420
2
260
380
400
3
160
260
340
4
40
130
240
5
0
50
100
6
0
0
20
68.
Refer to Table 11-2. Suppose the cost to install each streetlight is $900. How many streetlights
should the town
install to maximize total surplus from the streetlights?
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
Public Goods and Common Resources 2809
69.
Refer to Table 11-2. Suppose the cost to install each streetlight is $360. How many streetlights
should the town
install to maximize total surplus from the streetlights?
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
70.
Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have
agreed to split the
cost of the streetlights equally. If the families vote to determine the number of
streetlights to install, basing their
decision solely on their own willingness to pay (and trying to
maximize their own surplus), what is the greatest
number of streetlights for which the majority of
families would vote “yes?”
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
71.
Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have
agreed to split the
cost of the streetlights equally. If the families vote to determine the number of
streetlights to install, basing their
decision solely on their own willingness to pay (and trying to
maximize their own surplus), what is the greatest
number of streetlights for which the majority of
families would vote “yes?”
a.
1 streetlight
b.
2 streetlights
c.
3 streetlights
d.
4 streetlights
72.
Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have
agreed to split the
cost of installing the streetlights equally. To maximize their own surplus, how
many streetlights would the Greene’s
like the town to install?
a.
0 streetlights
b.
1 streetlight
c.
2 streetlights
d.
3 streetlights
73.
Refer to Table 11-2. Suppose the cost to install each streetlight is $600 and the families have
agreed to split the
cost of installing the streetlights equally. To maximize their own surplus, how
many streetlights would the Brown’s
like the town to install?
a.
0 streetlights
b.
1 streetlight
c.
2 streetlights
d.
3 streetlights
74.
Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have
agreed to split the
cost of installing the streetlights equally. To maximize their own surplus, how
many streetlights would the Black’s
like the town to install?
a.
0 streetlights
b.
1 streetlight
c.
2 streetlights
d.
3 streetlights
75.
Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have
agreed to split the
cost of installing the streetlights equally. If the residents choose to install the
number of streetlights that will
maximize total surplus from the streetlights, how much total
surplus will the Greene family receive?
a.
-$40
b.
$0
c.
$40
d.
$60
76.
Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have
agreed to split the
cost of installing the streetlights equally. If the residents choose to install the
number of streetlights that will
maximize total surplus from the streetlights, how much total
surplus will the Greene family receive?
a.
-$80
b.
$320
c.
$360
d.
$480
Public Goods and Common Resources 2813
Table 11-3
This table describes the police protection demands for three equal sized groups of people in
Safetyville. The second,
third, and fourth columns show the number of person-hours of police
protection per day that a group will demand
for a given price (the first column).
Price
Group #1
Group #2
Group #3
$42
0
0
0
$36
0
0
9
$30
0
9
18
$ 24
9
18
39
$ 18
18
39
66
$ 12
39
66
99
$ 6
66
99
132
$ 0
99
132
174
77.
Refer to Table 11-3. What is the value of the 99th unit of police protection in Safetyville?
a.
$0
b.
$6
c.
$12
d.
$18
78.
Refer to Table 11-3. What is the value of the 39th unit of police protection in Safetyville?
a. $24
b. $42
c. $54
d. $72
79.
Refer to Table 11-3. If the marginal cost of police protection is constant at $36 per person-hour,
what is the
efficient level of police protection to provide?
a.
9 units
b.
39 units
c.
66 units
d.
99 units
