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Subjective Short Answer
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?
7. Are common resources excludable? Are they rival in consumption?
8. Are public goods excludable? Are they rival in consumption?
9. Which two types of goods are rival in consumption?
10. Which two types of goods are excludable?
11. What particular characteristic do private goods and club goods have in common?
12. What particular characteristic do private goods and common resources have in common?
13. What particular characteristic do public goods and common resources have in common?
14. What particular characteristic do public goods and club goods have in common?
15. Refer to Scenario 11-2. Which of these goods is the best example of a private good? Briefly explain.
16. Refer to Scenario 11-2. Which of these goods is the best example of a public good? Briefly explain.
17. Refer to Scenario 11-2. Which of these goods is the best example of a club good? Briefly explain.
18. Refer to Scenario 11-3. Which of these goods is the best example of a private good? Briefly explain.
19. Refer to Scenario 11-3. Which of these goods is the best example of a club good? Briefly explain.
20. Refer to Scenario 11-3. Which of these goods is the best example of a common resource? Briefly explain.
21. Refer to Scenario 11-3. Do any of these goods cause an externality? If so, which one(s)? Positive or negative? Briefly
explain.
22. A rather large city has only one fire station, two fire trucks, and four firefighters. Is fire protection in this city
characterized by rivalry in consumption?
23. Why is cable TV reception regarded as a club good?
24. Is a tornado siren excludable? Is it rival in consumption? How do we classify a tornado siren in terms of the four types
of goods?
25. Is basic research excludable? Is it rival in consumption? How do we classify basic research in terms of the four types
of goods?
26. Identify the externality that arises when basic research leads to new general knowledge. Is the externality positive or
negative?
27. Is a congested nontoll road excludable? Is it rival in consumption? How do we classify a congested nontoll road in
terms of the four types of goods?
28. In what sense is it meaningful to say that fighting poverty is a public good?
29. Is national defense excludable? Is it rival in consumption? How do we classify national defense in terms of the four
types of goods?
30. Recall the four types of goods. Are national defense and a patented invention the same type of good? Briefly explain.
31. Recall the four types of goods. Are national defense and basic research the same type of good? Briefly explain.
32. In what way do public goods give rise to positive externalities?
33. Someone who uses a good without paying for it is called a ?
34. What is the main difficulty facing cost-benefit analysts when they attempt to evaluate the worthiness of proposed
public projects?
35. One way to place a value on human life is to examine the risks that people voluntarily take and how much they must
be paid for taking them. What is the approximate value of a human life according to studies that use this approach?
36. The mayor of Newton is considering proposals to deal with an unsafe intersection. She could install a traffic light at a
cost of $50,000 or she could install stop signs at a cost of $5,000. The traffic light is expected to reduce the risk of fatality
by 0.45 percent and the stop signs are expected to reduce the risk of fatality by 0.054 percent. If the value of human life is
estimated to be $10 million, what choice should the mayor make? Briefly explain.
37. Drivers have to pay a toll to drive on certain roads. In essence, a toll is a corrective tax on the externality of
__________.
38. Are whales excludable? Are they rival in consumption? How do we classify whales in terms of the four types of
goods?
39. Why does the commercial value of ivory threaten the elephant, while the commercial value of beef protects the cow?
40. In almost all cases of common resources, the same problem arises as in the Tragedy of the __________.
41. In what way do common resources give rise to negative externalities?
42. What can the government do to solve the problem of excessive use of common resources?
Figure 11-1
Rival in Consumption?
Yes
No
Excludable?
Yes
A
B
No
C
D
43. Refer to Figure 11-1. The box labeled A represents what type of good?
44. Refer to Figure 11-1. The box labeled B represents what type of good?
45. Refer to Figure 11-1. The box labeled C represents what type of good?
46. Refer to Figure 11-1. The box labeled D represents what type of good?
47. Refer to Figure 11-1. A mathematical theorem is an example of general knowledge. In which of the boxes — A, B, C,
or D — does a mathematical theorem belong?
48. Refer to Figure 11-1. In which box — A, B, C, or D — does clean air belong?
49. Refer to Figure 11-1. In which box — A, B, C, or D — does cable TV belong?
50. Refer to Figure 11-1. To which of the boxes — A, B, C, or D — does the phenomenon of free riding most clearly
apply?
51. Refer to Figure 11-1. With which of the boxes — A, B, C, or D — do we associate the Tragedy of the Commons?
52. Refer to Figure 11-1. In which box — A, B, C, or D — does each of the following types of roads belong? (Consider
each type of road separately.)
• an uncongested toll road
• an uncongested nontoll road
• a congested toll road
• a congested nontoll road
53. An absence of property rights often leads to market failure. When this is the case, how does society usually solve the
problem?
54. For all types of goods that are not private goods, the market fails to allocate resources efficiently because
_________________.
55. Place each of the following in the correct location in the table.
Rival?
Yes
No
Excludable?
Yes
Private Goods
Club Goods
No
Common Resources
Public Goods
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
56. 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?
57. Some advocates of antipoverty programs claim that fighting poverty is a public good. Describe why government
intervention may be necessary to reduce poverty.
58. 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?
59. Why do wild salmon populations face the threat of extinction while goldfish populations are in no such danger?
