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Public Goods and Common Resources 2895
13.
You and your friends watch a movie in your bedroom. For you and your friends, the enjoyment
that you get from
watching the movie is not rival in consumption.
a.
True
b.
False
14.
You and your friends eat potato chips in your bedroom. For you and your friends, the potato chips
are rival in
consumption.
a.
True
b.
False
15.
All goods that are excludable are also rival in consumption, but not all goods that are rival in
consumption are
excludable.
a.
True
b.
False
16.
Common resources and public goods have in common that they are not excludable and they are
not rival in
consumption.
a.
True
b.
False
17.
Private goods and club goods have in common that they are excludable, but are different in that
private goods are
rival while club goods are not rival in consumption.
a.
True
b.
False
18.
When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.
a.
True
b.
False
19.
A free-rider is someone who receives the benefit of a good but avoids paying for it.
a.
True
b.
False
20.
A free rider is a person who pays for a good but does not receive the benefit of it.
a.
True
b.
False
21.
The free-rider problem arises when the number of beneficiaries is large and exclusion of any of
them is impossible.
a.
True
b.
False
22.
When free riders are present in a market, the market generally fails to provide the efficient
outcome.
a.
True
b.
False
23.
Even economists who advocate small government agree that national defense is a good that the
government should
provide.
a.
True
b.
False
24.
Although national defense is currently a public good, economists who advocate small government
generally agree
that the U.S. should privatize national defense to increase the efficiency of the
good.
a.
True
b.
False
25.
One benefit of the patent system is that it encourages the production of technical knowledge.
a.
True
b.
False
26.
Government agencies, such as the National Science Foundation, subsidize basic research because
in the absence of
a subsidy too little research would be conducted.
a.
True
b.
False
27.
Because the benefits of basic research are obvious and easy to measure, it is likely that the public
sector pays for
the right amount and the right kinds of basic research.
a.
True
b.
False
28.
In some cases the government can make everyone better off by raising taxes to pay for certain
goods that the
market fails to provide.
a.
True
b.
False
29.
The free-rider problem makes it unlikely that poverty will be entirely eliminated through private
charity.
a.
True
b.
False
30.
Advocates of antipoverty programs claim that fighting poverty is a public good.
a.
True
b.
False
31.
Private markets usually provide lighthouses because ship captains have the incentive to navigate
using the lighthouse
and therefore will pay for the service.
a.
True
b.
False
32.
Some goods, such as lighthouses, can switch between being public goods and being private goods
depending on the
circumstances.
a.
True
b.
False
33.
A study that compares the costs and benefits to society of providing a public good is called
externality analysis.
a.
True
b.
False
34.
In determining whether and how much of a public good to provide, cost-benefits analysts use the
same type of price
signals for public goods as are readily available for private goods.
a.
True
b.
False
35.
Economists argue that we can calculate the value of a human life by observing voluntary risks that
people take every
day.
a.
True
b.
False
36.
If we can conclude that human life has a finite value, cost-benefit analysis can lead to solutions in
which human life
is worth less than the cost of a potential project.
a.
True
b.
False
37.
Aristotle writes, “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.” In this statement,
Aristotle is referring to the free-rider
problem that occurs when a person receives the benefit of a
good without paying for it.
a.
True
b.
False
38.
One solution to the “Tragedy of the Commons” is to turn the common resource into a private
good.
a.
True
b.
False
39.
An example of the “Tragedy of the Commons” is litter in the picnic area of a local park.
a.
True
b.
False
40.
London drivers who choose to drive in “congestion zones” pay a tax designed to reduce traffic
congestion.
a.
True
b.
False
41.
Governments that chose to make endangered elephants private goods have met with more
success protecting
elephants than governments that chose to make killing elephants illegal.
a.
True
b.
False
42.
One person's use of common resources does not reduce the enjoyment other people receive from
the resource.
a.
True
b.
False
43.
If Dave and Jesse are the only two fishermen in town and neither is bothered by the other's
fishing, the lake they fish
in is not a common resource.
a.
True
b.
False
44.
One possible solution to the problem of protecting a common resource is to convert that resource
to a private good.
a.
True
b.
False
45.
Tolls are not effective in altering people's incentives to drive during rush hour.
a.
True
b.
False
46.
The profit motive that stems from private ownership means that elephant populations are best
protected as common
resources.
a.
True
b.
False
47.
In the Tragedy of the Commons, joint action among the individual citizens would be necessary to
solve their common
resource problem unless the government intervenes.
a.
True
b.
False
48.
Depending on congestion, national parks can be either a common resource or a public good.
a.
True
b.
False
49.
Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a
common-resource
problem.
a.
True
b.
False
50.
The pollution market failure is an example of the free rider problem.
a.
True
b.
False
51.
When a highway is congested, giving rise to negative externalities, it is appropriate to view the
highway as a common
resource.
a.
True
b.
False
52.
Nontoll roads can be either public goods or common resources, depending upon the degree of
congestion.
a.
True
b.
False
53.
Markets may fail to allocate resources efficiently when property rights are not well established.
a.
True
b.
False
Public Goods and Common Resources 2909
Private Goods
Club Goods
Common Resources
Public Goods
54.
Place each of the following in the correct location in the table.
Rival?
Yes No
Excludable? Y
N
a.
Congested toll roads
b.
Knowledge
c.
Fish in the ocean
d.
National defense
e.
Congested nontoll roads
f.
Cable TV
g.
The environment
h.
Fire protection
i.
Ice-cream cones
j.
Uncongested toll roads
k.
Clothing
l.
Uncongested nontoll roads
55.
The creation of knowledge is a public good. Because knowledge is a public good, profit-seeking
firms tend to free-
ride on the knowledge created by others and, as a result, devote too few
resources to the creation of knowledge.
How does the U.S. government correct for this apparent
market failure?
56.
Some advocates of antipoverty programs claim that fighting poverty is a public good. Describe
why government
intervention may be necessary to reduce poverty.
57.
The government often intervenes when private markets fail to provide an optimal level of certain
goods and services.
For example, the government imposes an excise tax on gasoline to account for the negative
externality that drivers
impose on one another. Why might the private market not reach the socially
optimal level of traffic without the help
of government?
58.
Why do wild salmon populations face the threat of extinction while goldfish populations are in no
such danger?
2912 Public Goods and Common Resources
Problems
1.
When a good does not have a attached to it, private markets fail to ensure that the
good is produced
and consumed in the proper amounts.
2.
“Given that most people like to get ‘free stuff,’ it follows that goods that are available free of
charge are produced
and consumed in the proper amounts in a market economy.” What is wrong
with this statement?
3.
What do we mean when we say that a good is excludable?
4.
If no one can be prevented from using good x, then good x is one of two types of goods. What are
those two types?
5.
What do we mean when we say that a good is rival in consumption?
6.
If one person’s use of good x diminishes other people’s use of it, then good x is one of two types of
goods. What are
those two types?
