33. Your neighbor likes to blast 1970’s rock music and the louder the better. The loud music
imposes a cost on you because it disrupts your study of economics. Let
D
stand for the volume of
his music in decibels,
B
for his benefits and
C
for your costs, where
B
and
C
are measured in
dollars. For any given volume,
D
, your neighbor’s benefit is
B
= 0.63
D
– 0.002
D
2 and your cost is C
= 0.06
D
+ 0.001
D
2. What is the marginal cost to you at the socially efficient noise level?
A. $0.75
34. Your neighbor likes to blast 1970’s rock music and the louder the better. The loud music
imposes a cost on you because it disrupts your study of economics. Let
D
stand for the volume of
his music in decibels,
B
for his benefits and
C
for your costs, where
B
and
C
are measured in
dollars. For any given volume,
D
, your neighbor’s benefit is
B
= 0.63
D
– 0.002
D
2 and your cost is C
= 0.06
D
+ 0.001
D
2. What is the efficient Pigouvian tax?
A. $0.75 per decibel
35. Your neighbor likes to blast 1970’s rock music and the louder the better. The loud music
imposes a cost on you because it disrupts your study of economics. Let
D
stand for the volume of
his music in decibels,
B
for his benefits and
C
for your costs, where
B
and
C
are measured in
dollars. For any given volume,
D
, your neighbor’s benefit is
B
= 0.63
D
– 0.002
D
2 and your cost is C
= 0.06
D
+ 0.001
D
2. With an efficient Pigouvian tax, what noise level will your neighbor choose?
D. 345 decibels
36. Your neighbor likes to blast 1970’s rock music and the louder the better. The loud music
imposes a cost on you because it disrupts your study of economics. Let
D
stand for the volume of
his music in decibels,
B
for his benefits and
C
for your costs, where
B
and
C
are measured in
dollars. For any given volume,
D
, your neighbor’s benefit is
B
= 0.63
D
– 0.002
D
2 and your cost is C
= 0.06
D
+ 0.001
D
2. With an efficient Pigouvian tax, how much will your neighbor pay in noise
taxes?
D. $71.25
37. A tradable emissions permit:
A. entitles a firm to generate a specified amount of a given pollutant.
38. A common property resource is:
A. a resource that only one person can use.
39. The use of common property resources:
A. reduces positive externalities in many cases.
40. Common property resources include:
A. movies.
41. A public recreation area that has become unpleasantly crowded is exhibiting a negative
externality that is frequently associated with:
A. bargaining.
42. A public good:
D. All of these are true about public goods.
43. A good is nonrival if:
D. consumption is completely excludable.
44. A good is nonexcludable if:
D. consumption is completely excludable.
45. A private good:
D. imposes a negative externality when it is consumed by any one individual.
46. A private good:
D. is a good for which consumption involves perfect rivalry and is nonexcludable.
47. A free rider:
D. creates both positive and negative externalities.
48. Four stores have a problem with theft and security is a public good. Let
S
stand for the
number of person-hours of security patrols per week. The marginal benefit of security patrols to
each of the stores is given by the formula
MB
= 200/(1 +
S
). Patrols cost $25 per hour. Which of
the following gives the marginal social benefit function?
A.
MSB
= 50/(1 +
S
)
49. Four stores have a problem with theft and security is a public good. Let
S
stand for the
number of person-hours of security patrols per week. The marginal benefit of security patrols to
each of the stores is given by the formula
MB
= 200/(1 +
S
). Patrols cost $25 per hour. What is
the socially efficient level of security?
D. 32 person-hours of patrols per week
50. Four stores have a problem with theft and security is a public good. Let
S
stand for the
number of person-hours of security patrols per week. The marginal benefit of security patrols to
each of the stores is given by the formula
MB
= 200/(1 +
S
). Patrols cost $25 per hour. If each
store provided security independently, how much would each store purchase?
D. 16 person-hours of patrols per week
51. Four stores have a problem with theft and security is a public good. Let
S
stand for the
number of person-hours of security patrols per week. The marginal benefit of security patrols to
each of the stores is given by the formula
MB
= 200 – 2
S
. Patrols cost $20 per hour. Which of the
following gives the marginal social benefit function?
D.
MSB
= 196 – 2
S
52. Four stores have a problem with theft and security is a public good. Let
S
stand for the
number of person-hours of security patrols per week. The marginal benefit of security patrols to
each of the stores is given by the formula
MB
= 200 – 2
S
. Patrols cost $20 per hour. What is the
socially efficient level of security?
A. 90 person-hours of patrols per week
53. Four stores have a problem with theft and security is a public good. Let
S
stand for the
number of person-hours of security patrols per week. The marginal benefit of security patrols to
each of the stores is given by the formula
MB
= 200 – 2
S
. Patrols cost $20 per hour. If each store
provided security independently, how much would each store provide?
D. 97.5 person-hours of patrols per week
54. A Groves mechanism is a procedure for setting the level of a public good that:
D. only works if the public good in question is free of externalities.
55. The economist that devised a method for setting the level of a public good efficiently is:
A. John Nash.
56. The field of political economy:
D. examines the labor market.
57. A voter’s preferences are single-peaked if:
D. her total benefit from an activity decreases with the activity’s level until her ideal is reached
and declines thereafter.
58. The median voter is:
D. the voter who has the mean policy among all voters.
59. The median voter theorem states that:
A. if voters have multi-peaked preferences, all of them prefer the median ideal policy.
60. If voters have single-peaked preferences:
D. their net benefits from an activity decrease with the activity’s level up to some point and then
it increases.
AACSB: Reflective Thinking
Blooms: Remember
Difficulty: 1 Easy
Topic: Public Goods
Essay Questions
61. Why might bargaining break down when parties negotiate to remedy a market failure and
its associated externality?
62. Explain ways in which the government can remedy an externality.