True/False
Indicate whether the
sentence or statement is true or false.
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1.
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A public good is both rival and
excludable.
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2.
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A common resource is neither rival nor
excludable.
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3.
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An apple sold in a grocery store is a private
good.
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4.
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Goods produced by a natural monopoly are free to
the consumer of the good.
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5.
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Private markets have difficulty providing public
goods due to the free rider problem.
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6.
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If the local government sells apples at a roadside
stand, the apples are public goods because they are provided by the government.
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7.
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Public goods are related to positive externalities
because the potential buyers of public goods ignore the external benefits those goods provide to
other consumers when they make their decision about whether to purchase public goods.
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8.
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Common resources are overused because common
resources are free to the consumer.
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9.
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The socially optimal price for a fishing licence is
zero.
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10.
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The government should continue to spend to improve
the safety of our roads until there are no deaths from car accidents.
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11.
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Common resources are related to negative
externalities because consumers of common resources ignore the negative impact of their consumption
on other consumers of the common resource.
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12.
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If someone owned the property rights to clean air,
that person could charge for the use of the clean air in a market for clean air and, thus, air
pollution could be reduced to the optimal level.
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13.
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A fireworks display in the centre of large private
park is a good provided by natural monopoly.
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14.
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When the government uses cost-benefit analysis to
decide whether to provide a public good, the potential benefit of the public good can easily be
established by surveying the potential consumers of the public good.
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15.
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National defence is a classic example of a common
resource.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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16.
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If one person's consumption of a good
diminishes other people's use of the good, the good is said to be
a. | rival. | b. | a good produced by a natural monopoly. | c. | a common resource. | d. | excludable. |
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17.
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A public good is
a. | neither rival nor excludable. | b. | rival but not excludable. | c. | both rival and excludable. | d. | not rival but excludable. |
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18.
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A private good is
a. | rival but not excludable. | b. | not rival but excludable. | c. | both rival and excludable. | d. | neither rival nor excludable. |
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19.
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A good produced by a natural monopoly
is
a. | rival but not excludable. | b. | neither rival nor excludable. | c. | not rival but excludable. | d. | both rival and excludable. |
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20.
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A common resource is
a. | not rival but excludable. | b. | both rival and excludable. | c. | rival but not excludable. | d. | neither rival nor excludable. |
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21.
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Public goods are difficult for a private market to
provide due to
a. | the rivalness problem. | b. | the public goods problem. | c. | the Tragedy of the Commons. | d. | the free-rider problem. |
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22.
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Suppose each of 20 neighbours on a street values
street repairs at €3,000. The cost of the street repair is €40,000. Which of the
following statements is true?
a. | It is efficient for the government to tax the residents
€2,000 each and repair the road. | b. | It is efficient
for each neighbour to pay €3,000 to repair the section of street in front of his/her
home. | c. | None of these answers are
true. | d. | It is not efficient to have the street
repaired. |
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23.
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A free rider is a person who
a. | receives the benefit of a good but avoids paying for
it. | b. | pays for a good but fails to receive any benefit from
the good. | c. | fails to produce goods but is allowed to consume
goods. | d. | produces a good but fails to receive payment for the
good. |
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24.
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Which of the following is an example of a public
good?
a. | hot dogs at a picnic | b. | whales in the ocean | c. | national
defence | d. | apples on a tree in a public
park |
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25.
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A positive externality affects market efficiency in
a manner similar to a
a. | rival good. | b. | public good. | c. | private
good. | d. | common resource. |
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26.
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Suppose that requiring motorcycle riders to wear
helmets reduces the probability of a motorcycle fatality from 0.3 percent to 0.2 percent over the
lifetime of a motorcycle rider and that the cost of a lifetime supply of helmets is €500. It is
efficient for the government to require riders to wear helmets if human life is valued
at
a. | €150 or more. | b. | €500,000 or more. | c. | €50,000 or
more. | d. | €500 or more. | e. | €100 or more. |
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27.
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A negative externality affects market efficiency in
a manner similar to
a. | an excludable good. | b. | a private good. | c. | a common
resource. | d. | a public good. |
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28.
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When governments employ cost-benefit analysis to
help them decide whether to provide a public good, measuring benefits is difficult
because
a. | there are no benefits to the public since a public good
is not excludable. | b. | the benefits are
infinite because a public good is not rival and an infinite amount of people can consume it at the
same time. | c. | one can never
place a value on human life or the environment. | d. | respondents to
questionnaires have little incentive to tell the truth. |
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29.
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Which of the following is an example of a common
resource?
a. | a fireworks display | b. | national defence | c. | iron
ore | d. | a national park |
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30.
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The Tragedy of the Commons is a parable that
illustrates why
a. | common resources are
overconsumed. | b. | public goods are
underproduced. | c. | private goods are
underconsumed. | d. | natural monopolies
overproduce goods. |
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31.
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Which of the following are potential solutions to
the problem of air pollution?
a. | Grant rights of the clean air to citizens so that firms
must purchase the right to pollute. | b. | Auction off
pollution permits. | c. | Regulate the
amount of pollutants that firms can put in the air. | d. | all of these answers |
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32.
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When markets fail to allocate resources
efficiently, the ultimate source of the problem is usually
a. | government regulation. | b. | that prices are not low enough so firms
overproduce. | c. | that prices are
not high enough so people overconsume. | d. | that property
rights have not been well established. |
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33.
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If a person can be prevented from using a good, the
good is said to be
a. | excludable. | b. | a common resource. | c. | a public
good. | d. | rival. |
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34.
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A congested toll road is
a. | a good produced by a natural
monopoly. | b. | a private good. | c. | a public good. | d. | a common
resource. |
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35.
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A person who regularly watches BBC television
programmes in the UK but fails to pay their TV licence fee is known as
a. | excess baggage. | b. | a free rider. | c. | a costly
rider. | d. | a common resource. | e. | an unwelcome rider. |
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