Question 1

Which of the following best describes a public good?

Accepted Answer

A good that is not excludable and not rival in consumption.

Question 2

Suppose a city is considering building a new public park. Each of the 500 residents values the park at $$40, and the total cost to build the park is 10$$,000. If the city relies on voluntary contributions, only $2,000 is collected. What economic problem does this scenario illustrate?

Accepted Answer

The free-rider problem

Question 3

Which of the following is an example of a common resource?

Accepted Answer

Fish in the ocean

Question 4

A congested toll road is best categorized as which type of good?

Accepted Answer

Private good

Question 5

Why do markets tend to provide an inefficiently high quantity of common resources?

Accepted Answer

Because users neglect the negative externality imposed on others, leading to overuse.

Question 6

Which of the following policies could help solve the tragedy of the commons for a fishery?

Accepted Answer

Auctioning off a limited number of fishing permits

Question 7

If a good is excludable but not rival in consumption, it is best described as:

Accepted Answer

A club good

Question 8

Which of the following statements about cost-benefit analysis for public goods is correct?

Accepted Answer

It is difficult because there are no price signals to observe.

Question 9

Suppose the government wants to reduce congestion on a busy highway. Which of the following is an example of a corrective policy?

Accepted Answer

Charging a toll during rush hour

Question 10

Which of the following best explains why national defense is provided by the government rather than private markets?

Accepted Answer

Because national defense is a public good and suffers from the free-rider problem

Question 11

A road is uncongested and has no toll. According to the classification of goods, this road is:

Accepted Answer

A public good

Question 12

Which of the following is NOT a solution to the tragedy of the commons?

Accepted Answer

Allowing unlimited access to the resource

Question 13

If the government taxes every resident $$T to $$fund a public good, and the total benefit to society is $$B$$ while the cost is $$C$$, under what condition should the government provide the good?

Accepted Answer

$$B \u003e C$$

Question 14

Which of the following is an example of a negative externality associated with a common resource?

Accepted Answer

A driver causing congestion on a busy road

Question 15

Why do private markets fail to provide the efficient amount of public goods?

Accepted Answer

Because of the free-rider problem

Question 16

Which of the following best describes the difference between a common resource and a public good?

Accepted Answer

A common resource is rival in consumption, while a public good is not.

Question 17

Which of the following is an example of a club good?

Accepted Answer

A Netflix subscription

Question 18

Suppose the government is considering a project with a total cost of $$C = 12,000$$ and estimated total benefits of $$B = 15,000. $$According to cost-benefit analysis, what should the government do?

Accepted Answer

Accept the project because $$B \u003e C$$

Question 19

Which of the following is a reason why international cooperation is needed to manage ocean fisheries?

Accepted Answer

Oceans are common resources that are difficult to regulate by any one country

Question 20

Which of the following best explains why clean air is often overused?

Accepted Answer

Because clean air is a common resource and people are not charged for its use

Chapter 11: Public Goods and Common Resources: Excludability, Rivalry, and Market Outcomes

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