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Public Goods and Common Resources 2855
32.
Three business people meet for lunch at an Indian restaurant. They decide that each person will
order an item off
the menu, and they will share all dishes. They will split the cost of the final bill
evenly among each of the people at
the table. When the food is delivered to the table, each person
faces incentives similar to the
a.
consumption of a common resource good.
b.
production of a public good.
c.
consumption of a club good.
d.
production of a private good.
33.
Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will
order an item off
the menu, and they will share all dishes. They will split the cost of the final bill
evenly among each of the people at
the table. A Tragedy of the Commons problem is likely for
each of the following reasons except
a.
each person has an incentive to eat as fast as possible since their individual rate of consumption
will not affect
their individual cost.
b.
there is an externality associated with eating the food on the table.
c.
when one person eats, he may not take into account how his choice affects his friends.
d.
each dish would be both excludable and rival in consumption.
34.
A neighborhood voted to develop a vacant lot into a vegetable garden. All of the neighbors
worked the land and
sowed the seeds. A few neighbors picked and ate the produce before the
other neighbors had a chance. Which of
the following could solve this example of the Tragedy of
the Commons?
a.
The neighborhood divides the lot into equal size plots and each family can plant and harvest only
on their plot.
b.
The neighborhood continues to work the land and sow the seeds as a group, but sells all of the
produce to
willing buyers and reinvests the proceeds into the garden for the next year.
c.
The neighborhood decides to stop gardening on this land because there is no equitable way to
allocate the
produce.
d.
Both a and b are possible solutions to this example of the Tragedy of the Commons
35.
The Ogallala aquifer is a large underground pool of fresh water under several western states in
the United States.
Any farmer with land above the aquifer can at present pump water out of it. We might expect
that
a.
over time, the aquifer is likely to be overused.
b.
each farmer has a sufficient incentive to conserve the water.
c.
state governments have an incentive to insure that their farmers do not overuse the water.
d.
resources would be used more efficiently if the government paid for the pumps farmers use to
get the water.
36.
The Ogallala aquifer is a large underground pool of fresh water under several western states in
the United States. Any farmer with land above the aquifer can at present pump water out of it.
Which of the following statements
about the aquifer is correct?
a.
The aquifer is a public good which must be publicly owned to be used efficiently.
b.
The aquifer is a private good which must be privately owned to be used efficiently.
c.
The aquifer is a common resource which will be overused if no one owns it.
d.
The aquifer is a club good which should be left as it is.
37.
On holiday weekends thousands of people picnic in state parks. Some picnic areas become so
overcrowded the
benefit or value of picnicking diminishes to zero. An overcrowded picnic area is
an example of
a.
a private good.
b.
a club good.
c.
a Tragedy of the Commons.
d.
public good.
38.
The degradation of the environment from litter is a
a.
a negative externality.
b.
free rider problem.
c.
Tragedy of the Commons.
d.
Both a and c are correct.
39.
The sign on a church in your neighborhood reads “All are welcome at Sunday Service.” Because
the church has
limited seating and is usually full, the Sunday Service is
a.
a private good.
b.
a public good.
c.
a club good.
d.
a common resource.
40.
A New York legislator wanted to create a deposit on cigarettes butts. If implemented, people
would have the
incentive to (1) not toss cigarette butts onto public streets and sidewalks, and (2)
pick butts up to redeem them for
the cash. The degradation of the environment from littered
cigarette butts is a
a.
private goods problem.
b.
Nash equilibrium.
c.
Tragedy of the Commons.
d.
cost-benefit equilibrium.
41.
Which of the following is an example of the Tragedy of the Commons?
a.
The number of professional football teams increases to the point where the quality of the
games decreases, as
does television viewership.
b.
The number of satellites increases to the point where they begin running into each other.
c.
Disney World becomes so crowded that it institutes a lottery for admissions.
d.
A tiger breeding program becomes so successful that local zoos have to build additional exhibits
so that
visitors can view the cats.
42.
Which of the following is an example of government intervention to solve a Tragedy of the
Commons problem?
a.
subsidizing basic research
b.
building lighthouses
c.
toll charges on congested roads
d.
cost-benefit analysis
43.
Which of the following statements is not correct?
a.
A free rider is a person who benefits from something for which he or she does not have to pay.
b.
The creation of general knowledge is a public good.
c.
The Tragedy of the Commons illustrates the underuse of a common resource.
d.
A gasoline tax is an imperfect solution to the problem of traffic congestion on public roads.
44.
The Tragedy of the Commons describes
a.
government regulation that is necessary to combat externalities.
b.
overuse of a common resource relative to its economically efficient use.
c.
the nonrivalry feature of a common resource.
d.
an effective cost-benefit analysis.
45.
What causes the Tragedy of the Commons?
(i)
Social and private incentives differ.
(ii)
Common resources are not rival in consumption and are not excludable.
(iii)
Common resources are not excludable but are rival in consumption.
a.
(i) only
b.
(ii) only
c.
(i) and (ii) only
d.
(i) and (iii) only
46.
A toll on a congested road is in essence
a.
an interstate highway tax.
b.
a Department of Motor Vehicles tax.
c.
a gasoline tax.
d.
a corrective tax.
47.
A toll collected from each car traveling during rush hour on a congested road is an effective
correction to the
Tragedy of the Commons for all of the following reasons except the toll provides
an incentive for commuters to
a.
drive at times other than rush hour.
b.
use public transit rather than driving.
c.
drive more fuel-efficient cars.
d.
car-pool.
48.
The town of Isle is on a small island connected to Big City by a single bridge. Most of the
residents of Isle work in
Big City. As a result, the bridge becomes very congested for 2 hours each
day at the typical morning and evening
commute times. Which of the following policies
considered by the mayor of Isle would likely be most effective in
alleviating the congestion?
a.
A fixed toll for the bridge payable by every vehicle crossing the bridge at all days and times.
b.
A variable toll for the bridge payable only by vehicles crossing the bridge during the congested
commute
times.
c.
Any vehicle crossing the bridge at any time must have a sticker paid for with a one-time fee of
$25.
d.
A press conference in which the mayor requests that people try to cross the bridge earlier or
later than the
typical commute times.
49.
Which city currently charges drivers a “congestion toll” to drive into the heart of the city’s
financial, legal, and entertainment district?
a.
Washington, D.C.
b.
Sydney
c.
Tokyo
d.
London
50.
Which of the following is correct regarding road tolls as a way to reduce traffic?
a.
They can vary based on the amount of traffic that is present.
b.
They reduce drivers’ explicit cost of driving but increase drivers’ implicit cost.
c.
Some drivers can be made better off, but some drivers will inevitably made worse off.
d.
They are the solution to the free rider problem that occurs on roads.
51.
Which of the following is not an advantage to congestion charges for motorists who wish to drive
on busy streets?
a.
reduced travel time during peak hours
b.
reduced need for public transportation
c.
improved environmental quality
d.
improved valuation of a common resource
52.
A tax on gasoline often reduces road congestion because gasoline
a.
and driving are complements.
b.
and driving are substitutes.
c.
is a normal good, while driving is an inferior good.
d.
is an inferior good, while driving is a normal good.
53.
Variable tolls on roads
a.
are politically unpopular because people do not like the idea of paying for a good that they used
to consume
without paying for it directly.
b.
rise when traffic volume increases to ensure the speed on the road is kept high.
c.
are an effective way of correcting the common resource problem on roads.
d.
All of the above are correct.
54.
What do American drivers on congested roads and Soviet shoppers waiting in line to purchase
clothing have in
common?
a.
Both the American drivers and the Soviet shoppers are consuming products at prices that do
not represent the
full costs of the products.
b.
Both the American drivers and the Soviet shoppers can purchase as much as they want at the
market price.
c.
Both the American drivers and the Soviet shoppers could avoid waiting if the prices were
lowered.
d.
American drivers and Soviet shoppers have nothing in common.
55.
Using a toll to reduce traffic when congestion is greatest is an example of a
a.
regulation solution.
b.
command-and-control policy.
c.
corrective tax.
d.
Coase theorem solution.
56.
Which of the following statements is true of the tax on gasoline?
a.
The cost of collecting a gasoline tax outweighs the revenues raised by the tax.
b.
It is preferred to tolls as the best solution to road congestion.
c.
It discourages driving on noncongested roads, even though there is no congestion externality
for these roads.
d.
Both b and c are correct.
57.
A variable toll on a road in Washington reached a high during the evening rush hour of $5.75. This
toll bought the
drivers who paid it a 27 minute time savings. Which of the following is correct?
a.
For some consumers, the toll was less than the opportunity cost of the time they would have
spent in traffic.
b.
For some consumers, the toll was more than the opportunity cost of the time they would have
spent in traffic.
c.
No consumers would find this toll worth the time saved in traffic.
d.
Both a and b are correct.
58.
The idea of requiring motorists to pay to use the busiest streets in a city
a.
has been proposed by many public officials, but to date the idea never has been tried in a major
city anywhere
in the world.
b.
was tried in New York City in the 1990s, but the result was more — not less — congestion on
busy streets, and the experiment was short-lived.
c.
reflects the fact that a congested road is a public good.
d.
reflects the fact that a congested road is a common resource.
59.
By driving onto a congested road for which no toll is charged, a driver
a.
contributes to the overuse of a common resource.
b.
contributes to a negative-externality problem.
c.
is inflicting additional time cost on all of the other drivers.
d.
All of the above are correct.
Scenario 11-1
Becky is a single mother of two young children who spend their days at a daycare center while
Becky goes to work.
The daycare center closes at 5:30. If parents do not pick up their children at
or before 5:30, the daycare center
charges a late fee of $5 per child for every 10 minutes the
parent is late.
60.
Refer to Scenario 11-1. Due to traffic, Becky expects to be 20 minutes late to pick up her
children. How much
would she be willing to pay for a variable toll road that would get her to the
daycare center on time?
a.
any price less than $5
b.
any price less than $10
c.
any price less than $20
d.
Becky would not be willing to pay out of pocket to avoid traffic.
61.
Refer to Scenario 11-1. Suppose Becky lives in a city with an optional toll lane that assures a
drive at the posted
speed limit. She leaves her office at 5:00 for her usual 30 minute commute but
hears on the radio that if she drives in
the non-toll lanes, her commute will take 1 hour due to an
accident. Becky should
a.
call the daycare and tell them to expect her at 6:00.
b.
choose to drive in the free-flowing toll lane as long as the toll is less than $10.
c.
choose to drive in the free-flowing toll lane as long as the toll is less than $30.
d.
choose to drive an alternate route to try to avoid some of the traffic.
62.
One of the least regulated common resources today is
a.
state parks.
b.
the ocean.
c.
forest preserves.
d.
the Great Lakes.
63.
The U.S. government protects fish, a common resource, by
a.
subsidizing the fishing industry.
b.
heavily taxing competing industries.
c.
selling fishing licenses and regulating fish lengths.
d.
None of the above is correct.
64.
The goal of requiring licenses for hunting and fishing is
a.
to reduce the use of a common resource.
b.
to ensure that the people hunting and fishing are qualified.
c.
to generate revenue for the government.
d.
to monitor compliance with federal gun laws.
65.
Excessive fishing occurs because
a.
each individual fisherman has little incentive to maintain the species for the next year.
b.
fishermen rely on government managers to worry about fish populations.
c.
fishermen are unionized, so they are not concerned with externalities.
d.
fishermen have other marketable skills and do not fear exploitation of fish reserves.
66.
Stewart is a lobsterman. His traps are
a.
private goods and the lobster he catches are common resources.
b.
private goods and the lobster he catches are public goods.
c.
rival in consumption and the lobster he catches are not rival in consumption.
d.
not rival in consumption and the lobster he catches are not rival in consumption.
67.
The ocean remains one of the largest unregulated resources for each of the following reasons
except
a.
many countries have access to the ocean.
b.
it is difficult to get international cooperation among countries that hold different values.
c.
the oceans are so vast that enforcing any agreements would be difficult.
d.
All of the above are reasons the ocean remains one of the largest unregulated resources.
68.
Why do elephants face the threat of extinction while cows do not?
a.
Cattle are a valuable source of income for many people, while elephants have no market value.
b.
There is a high demand for products that come from cows, whereas there is no demand for
products that
come from elephants.
c.
There are still lots of cattle that roam free, while all elephants live in zoos.
d.
Cattle are owned by ranchers, while elephants are owned by no one.
69.
Because elephants roam freely in many countries in Africa, each individual African elephant
poacher has
a.
a strong incentive to kill as many elephants as he can find.
b.
a strong incentive to protect the elephants.
c.
the ability to save the elephants.
d.
None of the above is correct.
70.
Elephants are endangered, but cows are not because
a.
cows are not as valuable as elephants.
b.
elephants are a common resource, while cows are private goods.
c.
cows are a common resource, while elephants are private goods.
d.
it is legal to kill cows but not elephants.
71.
The commercial value of ivory is a threat to the elephant, but the commercial value of beef is a
guardian of the cow. This is because
a.
the cow is raised in developed countries, while the elephant lives primarily in less-developed
countries.
b.
cows are private goods, while elephants tend to roam freely without owners.
c.
cows and elephants are public goods, but ivory is nonrival.
d.
ivory is nonrival and nonexclusive, but beef is rival and exclusive.
72.
Why is the commercial value of ivory a threat to the elephant, while the commercial value of beef
is the cow's
guardian?
a.
Elephants live in Africa, whereas cows live in the United States.
b.
Elephants are a common resource.
c.
Cows are a common resource.
d.
Cows are a public good.
73.
Why has the value of ivory threatened the extinction of the elephant, whereas the value of beef
has enhanced the
survival of the cow?
a.
Cows are a common resource, whereas elephants are owned by governments.
b.
Elephants are larger than cows, requiring more economic resources.
c.
Elephants live in Africa, where economic resources are scarce.
d.
Elephants are a common resource, whereas cows are privately owned.
