True / False
1. When goods are available free of charge, the market forces that normally allocate resources in our economy are absent.
a.
True
b.
False
2. Free goods are usually efficiently allocated without government intervention.
a.
True
b.
False
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.
a.
True
b.
False
4. Government intervention cannot improve the allocation of resources for goods that do not have prices attached to them.
a.
True
b.
False
5. A good that is excludable but not rival is known as a club good.
a.
True
b.
False
6. National Public Radio would be considered a club good.
a.
True
b.
False
7. Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the show.
a.
True
b.
False
8. A pair of jeans is rival but non-excludable.
a.
True
b.
False
9. A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it.
a.
True
b.
False
10. A good that is excludable is one that someone can be prevented from using if she did not pay for it.
a.
True
b.
False
11. Some goods can be classified as either public goods or private goods depending on the circumstances.
a.
True
b.
False
12. Roads can be considered either public goods or common resources, depending on how congested they are.
a.
True
b.
False
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.
a.
True
b.
False
14. You and your friends eat potato chips in your bedroom. For you and your friends, the potato chips are rival in
consumption.
a.
True
b.
False
15. All goods that are excludable are also rival in consumption, but not all goods that are rival in consumption are
excludable.
a.
True
b.
False
16. Common resources and public goods have in common that they are not excludable and they are not rival in
consumption.
a.
True
b.
False
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.
a.
True
b.
False
18. When one person enjoys the benefit of a tornado siren, she reduces the benefit to others.
a.
True
b.
False
19. A free-rider is someone who receives the benefit of a good but avoids paying for it.
a.
True
b.
False
20. A free rider is a person who pays for a good but does not receive the benefit of it.
a.
True
b.
False
21. The free-rider problem arises when the number of beneficiaries is large and exclusion of any of them is impossible.
a.
True
b.
False
22. When free riders are present in a market, the market generally fails to provide the efficient outcome.
a.
True
b.
False
23. Even economists who advocate small government agree that national defense is a good that the government should
provide.
a.
True
b.
False
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.
a.
True
b.
False
25. One benefit of the patent system is that it encourages the production of technical knowledge.
a.
True
b.
False
26. Government agencies, such as the National Science Foundation, subsidize basic research because in the absence of a
subsidy too little research would be conducted.
a.
True
b.
False
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.
a.
True
b.
False
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.
a.
True
b.
False
29. The free-rider problem makes it unlikely that poverty will be entirely eliminated through private charity.
a.
True
b.
False
30. Advocates of antipoverty programs claim that fighting poverty is a public good.
a.
True
b.
False
31. Private markets usually provide lighthouses because ship captains have the incentive to navigate using the lighthouse
and therefore will pay for the service.
a.
True
b.
False
32. Some goods, such as lighthouses, can switch between being public goods and being private goods depending on the
circumstances.
a.
True
b.
False
33. A study that compares the costs and benefits to society of providing a public good is called externality analysis.
a.
True
b.
False
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.
a.
True
b.
False
35. Economists argue that we can calculate the value of a human life by observing voluntary risks that people take every
day.
a.
True
b.
False
36. If we can conclude that human life has a finite value, cost-benefit analysis can lead to solutions in which human life is
worth less than the cost of a potential project.
a.
True
b.
False
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.
a.
True
b.
False
38. One solution to the “Tragedy of the Commons” is to turn the common resource into a private good.
a.
True
b.
False
39. An example of the “Tragedy of the Commons” is litter in the picnic area of a local park.
a.
True
b.
False
40. London drivers who choose to drive in “congestion zones” pay a tax designed to reduce traffic congestion.
a.
True
b.
False
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.
a.
True
b.
False
42. One person’s use of common resources does not reduce the enjoyment other people receive from the resource.
a.
True
b.
False
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.
a.
True
b.
False
44. One possible solution to the problem of protecting a common resource is to convert that resource to a private good.
a.
True
b.
False
45. Tolls are not effective in altering people’s incentives to drive during rush hour.
a.
True
b.
False
46. The profit motive that stems from private ownership means that elephant populations are best protected as common
resources.
a.
True
b.
False
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.
a.
True
b.
False
48. Depending on congestion, national parks can be either a common resource or a public good.
a.
True
b.
False
49. Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common-resource
problem.
a.
True
b.
False
50. The pollution market failure is an example of the free rider problem.
a.
True
b.
False
51. When a highway is congested, giving rise to negative externalities, it is appropriate to view the highway as a common
resource.
a.
True
b.
False
52. Nontoll roads can be either public goods or common resources, depending upon the degree of congestion.
a.
True
b.
False
53. Markets may fail to allocate resources efficiently when property rights are not well established.
a.
True
b.
False
54. A traffic light would be considered a common resource.
a.
True
b.
False
Table 11-6
Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to
determine how many hours to spend in cleaning up the public lake. The table below shows each resident’s willingness to
pay for each hour of cleaning.
Hours
John
James
Mary
Lydia
1
$30
$50
$40
$10
2
25
40
37
9
3
20
30
34
8
4
15
20
30
7
5
9
10
25
6
6
3
0
15
5
7
0
0
5
4
55.
Refer to Table 11–6. Suppose the cost to clean the lake is $12 per hour and that the residents have agreed to split the cost
of cleaning the lake equally. The number of cleaning hours that maximizes total surplus of Widgetapolis is 7 hours.
a.
True
b.
False
56. Refer to Table 11–6. Suppose the cost to clean the lake is $8 per hour and that the residents have agreed to split the
cost of cleaning the lake equally. The number of cleaning hours that maximizes total surplus of Widgetapolis is 7 hours.
a.
True
b.
False
57. Refer to Table 11–6. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the
cost of cleaning the lake equally. It would maximize Lydia’s surplus if 6 hours of cleaning is done.
a.
True
b.
False
58. Refer to Table 11–6. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the
cost of cleaning the lake equally. It would maximize Mary’s surplus if 3 hours of cleaning is done.
a.
True
b.
False