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Exam 11: Public Goods and Common Resources

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Question 1

Multiple Choice

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Figure 11-1 Rival in Consumption? Yes No Excludable? ^Yes No -Refer to Figure 11-1. A bottle of soda is an example of the type of good represented by Box

A) A.
B) B.
C) C.
D) D.

E) B) and C)
F) A) and D)

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Question 2

Multiple Choice

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The Tragedy of the Commons for sheep grazing on common land can be eliminated by the government doing each of the following except

A) assigning land property rights.
B) auctioning off sheep-grazing permits.
C) taxing sheep flocks.
D) subsidizing sheep flocks.

E) A) and B)
F) A) and C)

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D

Question 3

Multiple Choice

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A streetlight is a

Table 11-2 Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight. -Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus) , what is the greatest number of streetlights for which the majority of families would vote "yes?"

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.

If no one can be prevented from using good x, then good x is one of two types of goods. What are those two types?

Figure 11-1 Rival in Consumption? Yes No Excludable? ^Yes No -Refer to Figure 11-1. Once good x is provided, policymakers need to be concerned about how much of it is used. Good x is an example of the type of good represented by Box

Mike Miller is the town manager of Medfield, a town with 50,000 residents. At a recent town meeting, several citizens proposed building a large public swimming pool in the center of town for all of the residents to enjoy. A survey of all 50,000 residents revealed that the pool would be worth $50 to each of them. The cost to build the swimming pool is $1,000,000. Which of the following is the most efficient option?

Why do wild salmon populations face the threat of extinction while goldfish populations are in no such danger?

Table 11-5 A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip. -Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000. How many ferry trips should there be to maximize the total surplus of the four business owners?

Are public goods excludable? Are they rival in consumption?

The privately-owned school system in Smalltown has a virtually unlimited capacity. It accepts all applicants and operates on both tuition and private donations. Although every resident places value on having an educated community, the school's revenues have suffered lately due to a large decline in private donations from the elderly population. Since the benefit that each citizen receives from having an educated community is a public good, which of the following would not be correct?

Some advocates of antipoverty programs claim that fighting poverty is a public good. Describe why government intervention may be necessary to reduce poverty.

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. Otherwise, it is a great place. An efficient solution to the parking problem would be to

People can be prevented from using a good if the good is

A free rider problem arises when

A local park filled with picnickers is

Cost-benefit analysis is important to determine the role of government in our economy because

The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?

When Rick uses a common resource and diminishes other people's enjoyment of it, he creates