Chapter 11/Public Goods and Common Resources ❖ 53
89. Refer to Figure 11-1. For which two boxes is it the case that externalities arise because something of value
has no price attached to it?
a.
Box A and Box B
b.
Box A and Box C
c.
Box B and Box D
d.
Box C and Box D
90. Refer to Figure 11-1. Which of the following statements is correct?
a.
A congested toll road is an example of the type of good represented by Box B.
b.
An uncongested toll road is an example of the type of good represented by Box D.
c.
A congested nontoll road is an example of the type of good represented by Box C.
d.
An uncongested nontoll road is an example of the type of good represented by Box A.
91. Refer to Figure 11-1. Which of the following items is not an example of the type of good represented by Box
D?
a.
a mathematical theorem
b.
an uncongested toll road
c.
national defense
d.
fighting poverty
92. Refer to Figure 11-1. Which of the following items is not a clear-cut example of the type of good represented
by Box A?
a.
a pair of pants
b.
a lighthouse
c.
a bicycle
d.
a cattle ranch
93. Refer to Figure 11-1. Which of the following items is not a clear-cut example of the type of good represented
by Box D?
a.
a fireworks display in a town with many residents
b.
national defense
c.
general knowledge
d.
a lighthouse
54 ❖ Chapter 11/Public Goods and Common Resources
94. Refer to Figure 11-1. Once good x is provided, policymakers need to be concerned about how much of it is
used. Good x is an example of the type of good represented by Box
a.
A.
b.
B.
c.
C.
d.
D.
95. Pollution is a
a.
problem that is entirely unrelated to the parable called the Tragedy of the Commons.
b.
problem that cannot be remedied with regulations or corrective taxes.
c.
negative externality that can be viewed as a public-goods problem.
d.
negative externality that can be viewed as a common-resource problem.
96. 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.
97. A city street is
a.
always a public good, whether or not it is congested.
b.
a public good when it is congested, but it is a common resource when it is not congested.
c.
a common resource when it is congested, but it is a public good when it is not congested.
d.
always a common resource, whether or not it is congested.
98. It would always be a mistake to view
a.
many species of animals as common resources.
b.
a road as a public good.
c.
national defense as a common resource.
d.
a fireworks display as a public good.
99. It would always be a mistake to view
a.
a tornado siren as a public good.
b.
a congested road as a common resource.
c.
cable TV as a common resource.
d.
a mathematical theorem as a public good.
Chapter 11/Public Goods and Common Resources ❖ 55
100. Which of the following statements is correct?
a.
The efficient provision of private goods is intrinsically more difficult than the efficient provision of
public goods.
b.
The efficient provision of public goods is intrinsically more difficult than the efficient provision of
private goods.
c.
Private markets provide quantities of public goods that exceed the socially-efficient quantities of
those goods.
d.
Private decision makers utilize quantities of common resources that fall short of the socially–
efficient quantities of those resources.
101. The enclosure movement in England in the 17th century represented an attempt to transform
a.
a public good into a private good.
b.
a private good into a public good.
c.
a private good into a common resource.
d.
a common resource into a private good.
102. The failure of markets to adequately protect the environment can viewed either as a problem of
a.
externalities or as a problem of common resources.
b.
externalities or as a problem of private goods.
c.
the overprovision of public goods or as a problem of the underprovision of private goods.
d.
club goods or as a problem that arises when the quantity of excludable goods exceeds the socially–
efficient quantity.
103. A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the At-
lantic waters south of Cape Cod based on a study of the lobster population. Which of the following statements
is not correct?
a.
Lobsters are rival but not excludable.
b.
The lobster population is an example of the tragedy of the commons.
c.
Reducing the quota on the number of lobsters any fisher can catch would have a protective effect
on the lobster population.
d.
If left unregulated, the lobster population will likely increase.
1. Markets do not ensure that the air we breathe is clean because
a.
clean air has no value.
b.
the government prevents markets from doing so.
c.
property rights are not well established for clean air.
d.
clean air is impossible to produce .
56 ❖ Chapter 11/Public Goods and Common Resources
2. Property rights are well established for
a.
private goods.
b.
public goods.
c.
common resources.
d.
both (b) and (c).
3. Consider the following problems: overcrowded public highways, overfishing in the ocean, polluted air, and the
near-extinction of the wild rhinoceros. What do these problems have in common?
a.
Private markets could easily solve them if governments left the markets alone.
b.
They would all go away if the government sponsored an intensive public-information campaign.
c.
They are all the result of a failure to establish clear property rights over something of value.
d.
They are all the result of a failure of corrective taxes.
4. Markets fail to allocate resources efficiently when
a.
prices fluctuate.
b.
people who have property rights abuse their privileges.
c.
property rights are not well established.
d.
the government refuses to intervene in private markets.
5. When the absence of property rights causes a market failure, the government can potentially solve the problem
a.
by clearly defining property rights.
b.
through regulation.
c.
by supplying the good itself.
d.
All of the above are correct.
6. A common theme among examples of market failure is
a.
the good being provided harms society in some systematic way.
b.
some item of value does not have an owner with the legal authority to control it.
c.
cost-benefit analysis will show that private markets should provide the goods and services.
d.
government intervention decreases the social benefits.
7. When property rights are not well established,
a.
private goods become public goods.
b.
markets fail to allocate resources efficiently.
c.
the distribution of private goods is unfair.
d.
government resources are used inefficiently.
Chapter 11/Public Goods and Common Resources ❖ 57
8. Which of the following represents a potential solution to the problem of environmental pollution?
a.
corrective taxes
b.
well established property rights
c.
government regulation
d.
All of the above are correct.
9. Governments can grant private property rights over resources that were previously viewed as public, such as
fish or elephants. Why would governments want to do so?
a.
to prevent overuse
b.
to decrease taxes
c.
to fight poverty
d.
to increase consumption
10. In which of the following examples are property rights not well established?
a.
Jim chooses to ride his bike to work rather than drive his car.
b.
Groups of students play loud music in the open area between the dorms.
c.
Aniella reads a book on her patio.
d.
Executives discuss corporate strategy in the company boardroom.
11. Which of the following statements is correct?
a.
The establishment of property rights sometimes gives rise to market failure.
b.
The absence of property rights sometimes gives rise to market failure.
c.
In the context of public goods, the Coase theorem implies that total surplus in some markets can be
improved by the elimination of property rights.
d.
well-being.
Government regulation of private behavior, in response to market failure, can never improve social
TRUE/FALSE
1. When goods are available free of charge, the market forces that normally allocate resources in our economy
are absent.
2. Free goods are usually efficiently allocated without government intervention.
3. Most goods in our economy are allocated in markets, where buyers pay for what they receive and sellers are
paid for what they provide.
58 ❖ Chapter 11/Public Goods and Common Resources
4. Government intervention cannot improve the allocation of resources for goods that do not have prices attached
to them.
5. A good that is excludable but not rival is known as a club good.
6. National Public Radio would be considered a club good.
7. Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the
show.
8. A pair of jeans is rival but non-excludable.
9. A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.
10. A good that is excludable is one that someone can be prevented from using if she did not pay for it.
11. Some goods can be classified as either public goods or private goods depending on the circumstances.
12. Roads can be considered either public goods or common resources, depending on how congested they are.
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.
Chapter 11/Public Goods and Common Resources ❖ 59
14. You and your friends eat potato chips in your bedroom. For you and your friends, the potato chips are rival in
consumption.
15. All goods that are excludable are also rival in consumption, but not all goods that are rival in consumption are
excludable.
16. Common resources and public goods have in common that they are not excludable and they are not rival in
consumption.
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.
18. When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.
19. A free-rider is someone who receives the benefit of a good but avoids paying for it.
20. A free rider is a person who pays for a good but does not receive the benefit of it.
21. The free-rider problem arises when the number of beneficiaries is large and exclusion of any of them is impos-
sible.
22. When free riders are present in a market, the market generally fails to provide the efficient outcome.
23. Even economists who advocate small government agree that national defense is a good that the government
should provide.
60 ❖ Chapter 11/Public Goods and Common Resources
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.
25. One benefit of the patent system is that it encourages the production of technical knowledge.
26. Government agencies, such as the National Science Foundation, subsidize basic research because in the ab-
sence of a subsidy too little research would be conducted.
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.
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.
29. The free-rider problem makes it unlikely that poverty will be entirely eliminated through private charity.
30. Advocates of antipoverty programs claim that fighting poverty is a public good.
31. Private markets usually provide lighthouses because ship captains have the incentive to navigate using the
lighthouse and therefore will pay for the service.
32. Some goods, such as lighthouses, can switch between being public goods and being private goods depending
on the circumstances.
33. A study that compares the costs and benefits to society of providing a public good is called externality analy-
sis.
Chapter 11/Public Goods and Common Resources ❖ 61
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.
35. Economists argue that we can calculate the value of a human life by observing voluntary risks that people take
every day.
36. If we can conclude that human life has a finite value, cost–benefit analysis can lead to solutions in which hu-
man life is worth less than the cost of a potential project.
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.
38. One solution to the “Tragedy of the Commons” is to turn the common resource into a private good.
39. An example of the “Tragedy of the Commons” is litter in the picnic area of a local park.
40. London drivers who choose to drive in “congestion zones” pay a tax designed to reduce traffic congestion.
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.
42. One person’s use of common resources does not reduce the enjoyment other people receive from the resource.
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.
62 ❖ Chapter 11/Public Goods and Common Resources
44. One possible solution to the problem of protecting a common resource is to convert that resource to a private
good.
45. Tolls are not effective in altering people’s incentives to drive during rush hour.
46. The profit motive that stems from private ownership means that elephant populations are best protected as
common resources.
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.
48. Depending on congestion, national parks can be either a common resource or a public good.
49. Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common–re-
source problem.
50. The pollution market failure is an example of the free rider problem.
51. When a highway is congested, giving rise to negative externalities, it is appropriate to view the highway as a
common resource.
52. Nontoll roads can be either public goods or common resources, depending upon the degree of congestion.
53. Markets may fail to allocate resources efficiently when property rights are not well established.
SHORT ANSWER
1. Place each of the following in the correct location in the table.
Chapter 11/Public Goods and Common Resources ❖ 63
Rival?
Yes
No
Excludable?
Yes
Private Goods
Club Goods
No
Common Resources
Public Goods
Congested toll roads
Knowledge
Fish in the ocean
National defense
Congested nontoll roads
Cable TV
The environment
Fire protection
Ice-cream cones
Uncongested toll roads
Clothing
Uncongested nontoll roads
2. 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?
3. Some advocates of antipoverty programs claim that fighting poverty is a public good. Describe why govern-
ment intervention may be necessary to reduce poverty.
4. 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
64 ❖ Chapter 11/Public Goods and Common Resources
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?
5. Why do wild salmon populations face the threat of extinction while goldfish populations are in no such dan-
ger?