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.
74. Many species of animals are common resources, and many must be protected by law to keep them from extinction.
Why is the cow not one of these endangered species even though there is such a high demand for beef?
a.
Cows reproduce at a high rate and have adapted well to their environment.
b.
Public policies protect cows from predators and diseases.
c.
Cows are privately owned, whereas many endangered species are owned by no one.
d.
There is a natural ecological balance between the birth rate of cows and human consumption.
75. Elephant populations in some African countries have started to rise because
a.
environmentalists have developed effective educational campaigns.
b.
the value of ivory has decreased.
c.
some elephants have been made a private good, and people are allowed to kill elephants on their own property.
d.
regulations are being enforced more forcefully.
76. It is common knowledge that many U.S. national parks have become overused. One possible solution to this problem
is to
a.
increase entrance fees.
b.
decrease camping permit fees.
c.
require all visitors to register upon entering the park.
d.
sell the land that the parks currently occupy.
77. 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. Suppose that the Minnesota State Park Service institutes a variable fee structure.
On weekdays when the picnic areas get little use, the fee is zero. On normal weekends, the fee is $8 per person. On
holiday weekends, the fee is $14 per person. The fee system corrects a problem known as the
a.
Coase theorem.
b.
free rider problem.
c.
Tragedy of the Commons.
d.
public goods problem.
78. Congressman Smith and Congresswoman Johnson both consider themselves advocates for the national parks and are
introducing different bills designed to benefit the parks. Congressman Smith’s bill calls for an increase in the entrance
fees. Congresswoman Johnson’s bill calls for a decrease in the entrance fees. Which of the bills would be more effective
at ensuring the quality of the national parks?
a.
Congressman Smith’s bill because it will reduce the overuse of the parks
b.
Congresswoman Johnson’s bill because more visitors means more citizens will value and care for the parks
c.
Both bills would be equally effective.
d.
Neither bill would be effective.
79. Nine friends who love the beach decide to pool their financial resources and equally share the cost of a one-week
house rental on Nantucket. Suppose that the beach outside of the house becomes more congested when the nine additional
people join the other beachgoers. Which of the following statements is not correct?
a.
Use of the beach by the nine new beachgoers will yield a negative externality.
b.
The town can reduce the congestion externality by raising the fee to access the beach.
c.
An increase in the fee to access the beach could be viewed as a corrective tax on the externality of congestion.
d.
Each of the nine friends would have been better off staying at home.
80. Ten friends who love to ski decide to pool their financial resources and equally share the cost of a one–week time-
share condominium in Alta, Utah. Suppose that the lift lines at the ski resort become more congested when the ten
additional people start to ski. Which of the following statements is not correct?
a.
Use of the ski resort by the ten new skiers will yield a negative externality.
b.
The ski resort can reduce the congestion externality by raising lift ticket prices.
c.
An increase in lift ticket prices could be viewed as a corrective tax on the externality of congestion.
d.
Each of the ten friends would have been better off staying at home.
81. Residents of Hong Kong are able to find restaurants that advertise a dish that contains grizzly bear paws. Since it is
unlikely that grizzly bear paws are purchased from a private producer of animal paws, we can likely conclude that
a.
international laws making it illegal to sell grizzly bear paws are likely to be very effective at eliminating these
offerings at Hong Kong restaurants.
b.
higher penalties for poaching grizzly bears will prevent poachers from killing.
c.
there are likely to be very few grizzly bear poachers.
d.
allowing individuals to own and raise grizzly bears for meat would likely reduce the threat of extinction to
grizzly bear populations.
82. Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited
to enjoy its beauty. When the weather is nice, it is difficult to find parking, and the trash cans overflow with food
wrappers on summer afternoons. Otherwise, it is a great place. The park is a common resource because
a.
people can be prevented from using it.
b.
access is limited due to driving distances.
c.
if too many people use it, one person’s use diminishes other peoples’ use.
d.
anyone can use it without affecting anyone else.
83. Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited
to enjoy its beauty. When the weather is nice, it is difficult to find parking on summer afternoons. Otherwise, it is a great
place. An efficient solution to the parking problem would be to
a.
prohibit parking in the vicinity of the park.
b.
charge higher prices for parking at busy times.
c.
police the parking area and ticket cars that are parked illegally.
d.
do nothing.
84. A stairwell in a certain office building is always congested at 12:00 p.m. and 1:00 p.m. The congestion is so bad that
people have been complaining to the building’s owner. Which of the following methods would be the most efficient way
of reducing congestion?
a.
Assign each person in the building a time when they are allowed to use the stairwell.
b.
Encourage people to voluntarily keep off the stairwell during peak times.
c.
Charge everyone who uses the stairwell when it is congested the same fee. People who value the use of the
stairs the most will be the ones who use the stairwell at peak times.
d.
Hold a lottery to determine who wins the right to use the stairwell at peak times.
85. On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric
companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that
a.
every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is
the most efficient.
b.
it would be more efficient if the electric company raised its rates for electricity at peak times.
c.
it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times.
d.
it would be more efficient to force everyone to cut their usage of electricity by the same amount.
86. On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric
companies may ask people to voluntarily cut back on their use of electricity. On these days, electricity is
a.
excludable, but nonrival in consumption.
b.
not excludable, but rival in consumption.
c.
excludable and rival in consumption.
d.
not excludable and nonrival in consumption.
87. Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to
the state with the understanding that the land will be used as a state beach that anyone may use without paying any fees.
This state beach
a.
will tend to be overused because it is nonexcludable.
b.
is a common resource when it becomes crowded on sunny summer weekends.
c.
is rival in consumption when it becomes crowded on sunny summer weekends.
d.
All of the above are correct.
88. Seymour owns 3 acres of beautiful waterfront property on a large inland lake. In his will, Seymour donates the land to
the state with the understanding that the land will be used as a state beach. Seymour wants an efficient way to prevent
overcrowding at the beach, so he should require
a.
that all beach visitors pay the same entry fee regardless of the day of the week or time of the year.
b.
that the beach limit the number of visitors to 500 per day, without an entry fee.
c.
an entry fee be charged on summer weekend days when many people tend to visit the beach.
d.
that only local residents be admitted to the beach.
89. An economics professor, upset about the rising cost of textbooks, proposed that his department purchase 50 copies of
a statistics book so the students in the statistics class would not have to purchase their own books but rather could borrow
a book for the semester and then return it for the next class to use. Which of the following strategies would not prevent a
common resource problem with the textbooks?
a.
Students will be required to pay a deposit for the textbook, which is refundable at the end of the semester
when the book is returned in good condition.
b.
The textbooks are placed in a common area of the department so students can borrow and return them as
needed.
c.
Students must sign a form agreeing to return the book or pay a fine equal to the replacement cost of the book.
d.
The textbooks are placed in the professor’s office and will only be given to students who are registered
members of the class. These students will not receive their final course grades until the books are returned.
90. 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.
91. 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.
92. 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.
93. 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.
94. A regional lobster management board recently proposed a five-year moratorium on lobster fishing in the Atlantic
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.
95. What do clean air in New York City and elephants in Africa have in common?
a.
They are both common resources.
b.
They are both public goods.
c.
They are both club goods.
d.
Both are excludable.
96. Which of the following is a common resource?
a.
a tornado siren
b.
fish raised on a farm
c.
timber in a public forest
d.
a traffic light