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Multiple Choice – Section 02: Public Goods
1. Because public goods are
a. excludable, people have an incentive to be free riders.
b. excludable, people do not have an incentive to be free riders.
c. not excludable, people have an incentive to be free riders.
d. not excludable, people do not have an incentive to be free riders.
2. In deciding whether a good is a public good, one must determine the
a. incomes of those who benefit from the good.
b. value of the external benefits that accrue to resource owners.
c. excludability of the good.
d. All of the above are correct.
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3. Which of the following is not a public good?
a. national defense
b. patented technological knowledge
c. general knowledge
d. the elimination of poverty
4. Which of the following goods is the best example of a public good?
a. garbage–collection services that are provided by a municipal government
b. music that is broadcast over the airwaves by a privately-owned FM radio station
c. electricity that is provided to farmhouses by a rural electric cooperative
d. cable TV services that are provided by a privately-owned firm that is regulated by the
government of the city in which it operates
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5. Without government intervention, public goods tend to be
a. overproduced and common resources tend to be overconsumed.
b. overproduced and common resources tend to be underconsumed.
c. underproduced and common resources tend to be overconsumed.
d. underproduced and common resources tend to be underconsumed.
6. Which of the following pairs of goods includes a good that is excludable and rival in consumption as
well as a good that is not excludable and not rival in consumption?
a. tablet computer, gym membership at a gym that always has plenty of open equipment and
classes
b. tablet computer, national defense
c. congested nontoll road, national defense
d. online music subscription, streetlight
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7. Which of the following pairs of goods includes a good that is excludable and rival in consumption as
well as a good that is excludable and not rival in consumption?
a. pizza, cable TV
b. pair of pants, clean air
c. clean air, mathematical theorem
d. basic research, fireworks display
8. The U.S. military defends Jacob from foreign attackers. The fact that Jacob enjoys this protection
does not detract
from others Americans’ enjoyment of it. For this reason, we say that national defense is
a. excludable.
b. not excludable.
c. rival in consumption.
d. not rival in consumption.
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9. A sidewalk runs across Jermichael’s front yard near the street. By law, anyone has the right to
use the sidewalk.
When Jermichael shovels the sidewalk after a heavy snowstorm,
a. he is providing a good that is excludable.
b. he is a free rider.
c. those who walk on the sidewalk are using a club good.
d. he is providing a good that is not rival and not excludable.
10. A free rider is a person who
a. will only purchase a product on sale.
b. receives the benefit of a good but avoids paying for it.
c. can produce a good at no cost.
d. rides public transit regularly.
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11. The free-rider problem exists with
a. public transportation
b. knowledge.
c. online music subscriptions.
d. All of the above are correct.
12. A free-rider problem exists for any good that is not
a. rival in consumption.
b. a private good.
c. free.
d. excludable.
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13. Consider a good for which the number of people who benefit from the good is large and the
exclusion of any one those people is impossible. In this case, the market for this good will likely
a. be provided by a private firm rather than the government.
b. have a free-rider problem.
c. not exist.
d. be limited to a small number of units of production.
14. Pete is a non-union employee at The Electric Co. The majority of the employees at The Electric
Co. are unionized. The union at The Electric Co. has negotiated very good benefits. Even though
he is not a union member and he does not have to pay union dues, Pete receives all the benefits
that the union has negotiated. Pete’s behavior is an example of
a. rivalry.
b. a barrier to entry.
c. free riding.
d. Taft-Hartley opposition.
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15. Because of the free-rider problem,
a. private markets tend to undersupply public goods.
b. the federal government spends too many resources on national defense and not enough
resources on medical research.
c. fireworks displays have become increasingly dangerous.
d. poverty has increased.
16. Who among the following is a free rider?
a. Ernie listens to National Public Radio, but does not contribute to any fundraising efforts.
b. Bert takes the commuter rail to work, but he purchases the discounted monthly passes rather
than buying tickets each day.
c. Grover sends his 5 children to a private school rather than to the public school in his
neighborhood.
d. Oscar goes to Elmo’s house to watch a football game on the local television channel.
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17. The free-rider problem
a. forces the supply of a public good to exceed its demand.
b. results in common resources becoming club goods.
c. explains why many local governments supply public goods.
d. results in public goods becoming private goods.
18. The phenomenon of free riding is most closely associated with which type of good?
a. private goods
b. club goods
c. common resources
d. public goods
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19. When good X is produced, some people benefit. A free-rider problem arises when
a. the number of people who benefit is small and it is impossible to prevent anyone from
benefiting.
b. the number of beneficiaries is small and it is possible to prevent some people from benefiting.
c. the number of beneficiaries is large and it is impossible to prevent anyone from benefiting.
d. the number of beneficiaries is large and it is possible to prevent some people from benefiting.
20. Market failure associated with the free-rider problem is a result of
a. a problem associated with pollution.
b. benefits that accrue to those who don’t pay.
c. losses that accrue to providers of the product.
d. market power.
21. When a free-rider problem exists,
a. the market will devote too few resources to the production of the good.
b. the cost of the good will always be more than the benefit of the good.
c. the good will not be produced.
d. entrepreneurs will eventually find a way to make free-riders pay their share.
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22. A free rider problem arises when
a. there are very few beneficiaries and exclusion of any one of them is possible.
b. there are many beneficiaries and exclusion of any one of them is possible.
c. there are many beneficiaries and exclusion of any one of them is impossible.
d. there are very few beneficiaries and they all try to use the good simultaneously.
23. On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though
it would be efficient for such a display to be produced. Which of the following statements is
correct?
a. The lack of a fireworks display in Yankeeville arises because of an externality.
b. The lack of a fireworks display in Yankeeville is a case of market failure.
c. In deciding not to produce a fireworks display in Yankeeville, private individuals and private
firms made decisions that were privately rational but socially inefficient.
d. All of the above are correct.
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24. On the Fourth of July, there is no fireworks display in the small town of Yankeeville, even though
it would be efficient for such a display to be produced. Which of the following statements is
correct?
a. The lack of a fireworks display in Yankeeville arises because of an externality.
b. The lack of a fireworks display in Yankeeville arises because the free-rider problem does not
apply to goods such as fireworks displays.
c. In deciding not to produce a fireworks display in Yankeeville, private individuals and private
firms made decisions that were privately irrational.
d. All of the above are correct.
25. Public schools, parks, libraries, and roads are paid for largely through tax revenue because
a. society finds them so valuable that citizens are happy to pay for their full cost.
b. these goods create a free-rider problem.
c. if they were funded privately, too many of these goods would be produced.
d. All of the above are correct.
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26. Suppose that everyone prefers to live in a society without poverty. Further suppose that some
private charities are successful in reducing poverty. People who do not contribute to the charities
a. receive no external benefit from private antipoverty programs.
b. decrease the reliance of individuals on antipoverty programs.
c. can free ride on the generosity of others.
d. are most likely to be in favor of government-sponsored programs.
27. Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town
meeting, several citizens proposed building a large public swimming pool in the center of town for
all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be
worth $50 to each of them. Because the cost to build the swimming pool is only $1,000,000,
Manager Miller arranges to have the pool built. Everyone in town enjoys the pool, but when
Manager Miller asks for donations to pay for the pool, he only collects $250,000. Manager Miller
soon realizes that
a. the survey was conducted improperly.
b. the cost of the pool exceeded the social benefits.
c. the pool is a club good.
d. most residents of the town are probably free-riders at the pool.
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28. Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town
meeting, several citizens proposed building a large public swimming pool in the center of town for
all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth
$50 to each of them. The cost to build the swimming pool is $1,000,000. Which of the following is
the most efficient option?
a. The pool should be built and paid for with donations collected from residents, as these donations
should more than cover the cost of the pool.
b. The pool should be built and paid for by the town government and paid for with a tax on the
residents because all residents would benefit from it but some residents would not donate if
they were asked.
c. The pool should be built and paid for by the wealthiest ten percent of the residents.
d. The pool should not be built because the social value does not exceed the cost.
29. Private markets usually fail to provide lighthouses because
a. lighthouses cost too much to build relative to their benefits.
b. government intervention makes it hard for private lighthouse owners to compete in the market.
c. ship captains have incentives to use lighthouses without paying.
d. lighthouses are valued very little by ship captains these days.
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30. Most lighthouses are operated by the government because
a. of the free-rider problem.
b. lighthouses are no longer valued by society.
c. most lighthouses are only tourist attractions in state and national parks.
d. shipping companies would not be able to afford maintenance fees for lighthouses.
31. A lighthouse is typically considered to be a public good because
a. the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse.
b. there is rarely another lighthouse nearby to provide competition.
c. a nearby port authority cannot avoid paying fees to the lighthouse owner.
d. all passing ships are able to enjoy the benefits of the lighthouse without paying.
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32. A lighthouse might be considered a private good if
a. there is a second lighthouse nearby, thus preventing a monopoly.
b. the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the
lighthouse.
c. ships are able to enjoy the benefits of the lighthouse without paying for the benefit.
d. a nearby port authority is able to avoid paying any fees to the lighthouse owner.
33. Which of the following is an example of the free–rider problem?
a. Both Zoe and Zach receive low-cost dental care at the local dental school, so neither of them
pays the full cost of the care.
b. Alfred receives a free lunch from the local “Meals on Wheels” program because of his low
monthly income.
Yet his next door neighbor, Alice, is not eligible for the free lunch.
c. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives
next to Bruce, and Buster’s barking can be heard whenever anyone walks near her house, too.
Thus, Betty receives free protection from burglars because of Buster‘s barking.
d. Sam purchases a burger at a fast food restaurant and gets a second burger free because the
restaurant is having a buy one, get one free sale.
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34. National defense is a classic example of a public good because
a. there is no market for private security services.
b. it is difficult to exclude people from receiving the benefits from national defense once it is
provided.
c. everyone agrees that some level of national defense is important, but only the government
knows the optimal amount.
d. there are no private firms willing to supply defense goods such as tanks and weapons.
35. The national defense of the United States is not rival because
a. my enjoyment of the national defense does not diminish your enjoyment of the national defense
of the United States.
b. my enjoyment of the national defense does diminish your enjoyment of the national defense of
the United States.
c. once the nation is defended, it is impossible to prevent any single person from enjoying the
benefit of this defense.
d. once the nation is defended, it is possible to prevent any single person from enjoying the benefit
of this defense.
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36. The national defense of the United States is not excludable because
a. my enjoyment of the national defense does not diminish your enjoyment of the national defense
of the United States.
b. my enjoyment of the national defense does diminish your enjoyment of the national defense of
the United States.
c. once the nation is defended, it is impossible to prevent any single person from enjoying the
benefit of this defense.
d. once the nation is defended, it is possible to prevent any single person from enjoying the benefit
of this defense.
37. It is commonly argued that national defense is a public good. Nevertheless, the weapons used by
the U.S. military are produced by private firms. We can conclude that
a. resources would be used more efficiently if the government produced the weapons.
b. resources would be used more efficiently if private firms provided national defense.
c. weapons are rival in consumption and excludable, but national defense is not rival in
consumption and not excludable.
d. national defense is rival in consumption and excludable, but weapons are not rival in
consumption and not excludable.
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38. National defense is provided by the government because
a. it is impossible for private markets to produce public goods.
b. products provided by the government are produced more efficiently.
c. free-riders make it difficult for private markets to supply the socially optimal quantity.
d. public goods increase government revenues.
39. Even economists who advocate small government agree that
a. national defense is a public good and that the government should provide it.
b. national defense is a common resource and that the government should provide it.
c. national defense is a public good, but many of them believe that it should be provided by private
firms rather than by the government.
d. national defense is a common resource, but many of them believe that it should be provided by
private firms rather than by the government.
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40. Knowledge is an example of a
a. public good.
b. private good.
c. common resource.
d. club good.
41. Knowledge that is patented is a
a. public good, whereas knowledge that is not patented is a common resource.
b. private good, whereas knowledge that is not patented is a club good.
c. common resource, whereas knowledge that is not patented is a private good.
d. club good, whereas knowledge that is not patented is a public good.