Question 1

Which of the following is likely to cause market failure and be undersupplied?

Accepted Answer

A)   Research
B)   Orange juice
C)   River water
D)   Grazing pastureE) B) and D)
F) C) and D)

Question 2

A government ban on a good that suffers from overconsumption may be ineffective if the:

Accepted Answer

A)   likelihood of being caught breaking the ban is sufficiently high.
B)   likelihood of being caught breaking the ban is very low.
C)   punishment for breaking the ban is severe.
D)   public did not participate in setting the punishments.E) B) and D)
F) B) and C)

Question 3

If the cost were greater than the marginal benefit of a good:

Accepted Answer

A)   consumers could increase their utility by buying more.
B)   consumers could increase their utility by buying less.
C)   producers should increase production.
D)   social net benefit would be maximized.E) B) and C)
F) B) and D)

Question 4

If those who consumed common resources were subject to a tax that was equal to the external costs that they imposed due to the negative externality created,their demand curve would shift:

Accepted Answer

A)   up and they would consume more.
B)   down and they would consume less.
C)   down and they would consume more.
D)   up and they would consume less.E) A) and B)
F) None of the above

Question 5

Because government bodies have the power to make up for inadequate supply of a good:

Accepted Answer

A)   its presence as a producer is in virtually every market.
B)   it can be efficiency enhancing in markets for public goods.
C)   they have incentive to compete with local businesses.
D)   None of these statements is true.E) A) and B)
F) A) and C)

Question 6

Private goods are:

Accepted Answer

A)   not rival in consumption, but excludable.
B)   rival in consumption and excludable.
C)   rival in consumption, but not excludable.
D)   not rival in consumption and not excludable.E) A) and C)
F) None of the above

Question 7

Not having to pay for a good leads to:

Accepted Answer

A)   underconsumption.
B)   oversupply.
C)   overconsumption.
D)   irrational consumption.E) A) and C)
F) A) and B)

Question 8

Excludability matters because it:

Accepted Answer

A)   allows owners to set an enforceable price on a good.
B)   allows consumers to control the price of a good.
C)   creates a perceived scarcity that allows the seller to keep the price artificially high.
D)   creates a perceived scarcity that causes buyers to have an inelastic demand for the good.E) B) and C)
F) A) and B)

Question 9

An example of an excludable good or service is:

Accepted Answer

A)   national defense.
B)   a public park.
C)   ice cream.
D)   air.E) None of the above
F) B) and C)

Question 10

An example of a public good is:

Accepted Answer

A)   national defense.
B)   libraries.
C)   timber.
D)   natural gas.E) None of the above
F) B) and C)

Question 11

Cookies would be considered:

Accepted Answer

A)   a common resource.
B)   a private good.
C)   a public good.
D)   an artificially scarce good.E) C) and D)
F) A) and B)

Question 12

Goods that are neither rival in consumption nor excludable are:

Accepted Answer

A)   a common resource.
B)   a private good.
C)   a public good.
D)   an artificially scarce good.E) A) and C)
F) C) and D)

Question 13

Bans are applied to:

Accepted Answer

A)   common-resource problems.
B)   reduce the inefficiency created by overuse.
C)   situations where the optimal quantity of consumption is zero.
D)   All of these statements are true.E) All of the above
F) B) and D)

Question 14

An example of an excludable good or service is a:

Accepted Answer

A)   movie in a theater.
B)   city park.
C)   rainbow.
D)   levee system.E) B) and D)
F) A) and B)

Question 15

Markets work well for allocating ____________ efficiently,but not always so well for allocating ______________________.

Accepted Answer

A)   private goods; public goods
B)   public goods; private goods
C)   common resources; public goods
D)   public goods; common resourcesE) A) and B)
F) C) and D)

Question 16

Using tradable allowances instead of quotas may be a better solution to the provision of common resources because they:

Accepted Answer

A)   allocate the good in a less efficient way, and quotas do not.
B)   ensure that the resource is allocated to those with the highest willingness to pay, while quotas do not.
C)   assign private property rights-and an incentive, as owners, which means common resource now get overused, and quotas do not.
D)   allow the government to set a specific amount of the good to be consumed, while quotas do not.E) A) and B)
F) A) and C)

Question 17

When the government bans a good it:

Accepted Answer

A)   creates a more efficient solution than any other to the nonexcludability problem.
B)   is an easy, but often ineffective, solution to the nonexcludability problem.
C)   increases surplus more than any other solution to the nonexcludability problem.
D)   is the easiest and most effective solution to the nonexcludability problem.E) None of the above
F) A) and B)

Question 18

One way the government decides how to pay for public goods is:

Accepted Answer

A)   how easy it is to exclude people who don't pay.
B)   determining who uses the good the most and increasing their property taxes.
C)   comparing individual's marginal benefits of the good.
D)   polling the public about the most appropriate funding measures.E) A) and C)
F) C) and D)

Question 19

When a good is rival in consumption:

Accepted Answer

A)   one person's consumption prevents or decreases others' ability to consume it.
B)   it is possible for sellers to prevent its use by those who have not paid for it.
C)   consumers have a perception of scarcity of that good.
D)   the government has specific import policies limiting its supply.E) A) and D)
F) C) and D)

Question 20

Free riders enjoy:

Accepted Answer

A)   negative externalities from others' choices to pay for a good.
B)   positive externalities from others' choices to pay for a good.
C)   positive externalities transferred from consumers who receive subsidies.
D)   positive externalities from a good they choose to buy themselves.E) A) and B)
F) A) and C)

Exam 19: Public Goods and Common Resources

Cookies would be considered:

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Goods that are neither rival in consumption nor excludable are:

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Bans are applied to:

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If those who consumed common resources were subject to a tax that was equal to the external costs that they imposed due to the negative externality created,their demand curve would shift:

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An example of an excludable good or service is a:

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Excludability matters because it:

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If the cost were greater than the marginal benefit of a good:

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Using tradable allowances instead of quotas may be a better solution to the provision of common resources because they:

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Which of the following is likely to cause market failure and be undersupplied?

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Because government bodies have the power to make up for inadequate supply of a good:

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When a good is rival in consumption:

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One way the government decides how to pay for public goods is:

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An example of an excludable good or service is:

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Private goods are:

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When the government bans a good it:

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Not having to pay for a good leads to:

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Free riders enjoy:

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A government ban on a good that suffers from overconsumption may be ineffective if the:

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An example of a public good is:

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Markets work well for allocating ____________ efficiently,but not always so well for allocating ______________________.

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Markets work well for allocating efficiently,but not always so well for allocating __________.

Correct Answer
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