Chapter 11/Public Goods and Common Resources ❖ 41
29. 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.
30. The overuse of a common resource relative to its economically efficient use is called
a.
the free rider problem.
b.
the Tragedy of the Commons.
c.
a public good.
d.
cost-benefit analysis.
31. 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.
32. One economically efficient way to eliminate the Tragedy of the Commons is to
a.
tax the owners of the resource.
b.
prevent anyone from using the resource.
c.
reduce the marginal social benefit of the resource.
d.
establish private ownership of the resource.
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.
42 ❖ Chapter 11/Public Goods and Common Resources
34. 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
35. Each of the following would be considered a common resource except
a.
clean air.
b.
congested nontoll roads.
c.
national defense.
d.
open grazing land.
36. 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.
37. 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.
38. 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.
Chapter 11/Public Goods and Common Resources ❖ 43
39. 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
40. Which of the following is not an advantage of road tolls as a way to reduce traffic?
a.
They charge people based on consumption.
b.
They can help bring usage closer to its optimal level.
c.
Rates can differ according to the time of day.
d.
The administrative costs of collecting the tolls are almost zero, especially for local roads.
41. Which of the following is not an advantage to congestion charges for motorists who wish to drive on busy
streets?
a.
reduced carbon monoxide pollution
b.
increased use of public transportation
c.
improved taxi service
d.
shorter travel time
42. 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.
43. 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.
44 ❖ Chapter 11/Public Goods and Common Resources
44. 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.
45. 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.
46. One of the least regulated common resources today is
a.
state parks.
b.
the ocean.
c.
forest preserves.
d.
the Great Lakes.
47. 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.
48. 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.
Chapter 11/Public Goods and Common Resources ❖ 45
49. 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.
50. Four roommates share an off-campus house and equally share the cost of rent. Everyone says that she values a
clean house, yet the house is usually dirty. To an economist, a clean house in this case represents
a.
a common resource problem.
b.
a public good.
c.
a natural monopoly.
d.
All of the above are correct.
51. When Rick uses a common resource and diminishes other people’s enjoyment of it, he creates
a.
a free rider problem.
b.
an externality.
c.
a nonrenewable resource.
d.
general knowledge.
52. 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.
53. 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.
54. 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.
46 ❖ Chapter 11/Public Goods and Common Resources
55. 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.
56. 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.
57. 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.
58. 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.
59. Many species of animals are common resources, and many must be protected by law to keep them from ex-
tinction. 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.
Chapter 11/Public Goods and Common Resources ❖ 47
60. Elephant populations in some African countries have started to rise because
a.
poachers and environmentalists are working together to save the elephants.
b.
new laws make killing elephants and selling their ivory illegal.
c.
some elephants have been made a private good, and people are allowed to kill elephants on their
own property.
d.
high ivory taxes make it hard to earn a decent return on elephant tusks.
61. 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.
62. One proposed solution to overused, deteriorating national parks would be to
a.
increase the number of bears through breeding programs.
b.
have Congress increase the entrance fees.
c.
decrease management and maintenance of facilities.
d.
reduce the number of improved camping facilities.
63. 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.
64. 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 con-
clude 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.
48 ❖ Chapter 11/Public Goods and Common Resources
65. 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.
66. 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 be-
cause
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.
67. 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. Oth-
erwise, 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.
68. 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.
69. 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.
Chapter 11/Public Goods and Common Resources ❖ 49
70. 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 property resource which will be overused if no one owns it.
d.
The aquifer is a club good which should be left as it is.
71. 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.
72. On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, elec-
tric 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.
73. On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, elec-
tric 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.
74. Which of the following statements is correct?
a.
Common resources are nonexcludable and nonrival in consumption.
b.
Uncongested toll roads are an example of the free rider problem.
c.
When African elephants were privatized, the survival of the species improved.
d.
Fish in the ocean are excludable but nonrival in consumption.
50 ❖ Chapter 11/Public Goods and Common Resources
75. 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.
76. Phil owns 10 acres of beautiful wooded land. When Phil decides to move to be closer to his grandchildren, he
donates the land to the state with the understanding that the land will be used as a state park that anyone may
use without paying any fees. This state park
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.
77. Phil owns 10 acres of beautiful wooded land. When Phil decides to move to be closer to his grandchildren, he
donates the land to the state with the understanding that the land will be used as a state park. Phil wants an
efficient way to prevent overcrowding at the park, so he should require
a.
that no park visitors ever pay an entry fee.
b.
that the park 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 park
d.
an entry fee be charged every day of the year, regardless of the number of people who would like to
visit the park.
78. A textbook is a
a.
private good and the knowledge that one gains from reading the book is a common resource.
b.
private good and the knowledge that one gains from reading the book is a public good.
c.
common resource and the knowledge that one gains from reading the book is a public good.
d.
common resource and the knowledge that one gains from reading the book is a private good.
79. 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
Chapter 11/Public Goods and Common Resources ❖ 51
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.
80. Mitch hunts deer. His shotgun is
a.
a private good and the deer he hunts are common resources.
b.
a private good and the deer he hunts are public goods.
c.
rival in consumption and the deer he hunts are not rival in consumption.
d.
not rival in consumption and the deer he hunts are not rival in consumption.
Figure 11-1
Rival in Consumption?
Yes
No
Excludable?
Yes
A
B
No
C
D
81. Refer to Figure 11-1. The box labeled A represents
a.
private goods.
b.
club goods.
c.
common resources.
d.
public goods.
82. Refer to Figure 11-1. The box labeled B represents
a.
private goods.
b.
club goods.
c.
common resources.
d.
public goods.
52 ❖ Chapter 11/Public Goods and Common Resources
83. Refer to Figure 11-1. The box labeled C represents
a.
private goods.
b.
club goods.
c.
common resources.
d.
public goods.
84. Refer to Figure 11-1. The box labeled D represents
a.
private goods.
b.
club goods.
c.
common resources.
d.
public goods.
85. Refer to Figure 11-1. The more Jane uses good x, the less of that good there is for other people to use. Nei-
ther Jane nor anyone else can be prevented from using the good. Good x is an example of the type of good
that belongs in
a.
Box A, which represents private goods.
b.
Box B, which represents common resources.
c.
Box C, which represents common resources.
d.
Box D, which represents public goods.
86. Refer to Figure 11-1. Cable TV is an example of the type of good represented by Box
a.
A.
b.
B.
c.
C.
d.
D.
87. Refer to Figure 11-1. A tornado siren in a small town is an example of the type of good represented by Box
a.
A.
b.
B.
c.
C.
d.
D.
88. Refer to Figure 11-1. A ham sandwich is an example of the type of good represented by Box
a.
A.
b.
B.
c.
C.
d.
D.