Question 1

To determine the efficient quantity of a public good to supply,

Accepted Answer

A)   the private firms that will produce the good each produce the exact same quantity.
B)   politicians use the principle of maximum differentiation.
C)   total benefit is equated to total cost, the same as is done to determine the efficient quantity of a private good.
D)   marginal benefit and marginal cost are equated, the same as is done to determine the efficient quantity of a private good.
E)   marginal benefit must exceed marginal cost by as much as possible.F) A) and E)
G) A) and C)

Question 2

Which of the following can bring about an efficient level of public goods being provided by the government?

Accepted Answer

A)   Free riding on the part of voters.
B)   Competition between political parties trying to win an election.
C)   Voters who do not care about the benefits and costs of public goods.
D)   Rational ignorance on the part of voters.
E)   Self-interest among government bureaucrats.F) B) and D)
G) A) and E)

Question 3

Voters typically have information only about issues that have a perceptible effect on their wellbeing and tend not to have information about other issues. Behaviour such as this is known as

Accepted Answer

A)   inefficient overprovision.
B)   political competition.
C)   the tragedy of voters.
D)   rational ignorance.
E)   voter preferences.F) None of the above
G) B) and D) D

Question 4

Why are private firms unable to produce public goods?

Accepted Answer

A)   The tragedy of the commons means that private firms produce an inefficient amount of public goods.
B)   The marginal cost of production is too high for private production to be possible.
C)   Because the government outlaws private firms from producing them.
D)   They can produce these goods, but they would not earn any revenue because of the free-rider problem.
E)   None of the above answers is correct.F) B) and E)
G) All of the above

Question 5

The fact that Victoria's consumption of national defence does not preclude Tasmania from consuming the same national defence is an example of

Accepted Answer

A)   the rival nature of consumption.
B)   a good that is nonrival in consumption.
C)   a private good.
D)   excludable goods.
E)   a common resource.F) A) and E)
G) A) and B)

Question 6

We determine the economy's marginal benefit curve for a public good or service by

Accepted Answer

A)   dividing the sum of the marginal benefit of each member of society by the number of people in society.
B)   horizontally summing the individual marginal benefit curve of each member of society.
C)   multiplying the marginal benefits of each member of society.
D)   vertically summing the individual marginal benefit curve of each member of society.
E)   vertically summing individual firms' marginal cost curves.F) None of the above
G) C) and D)

Question 7

One way to overcome the tragedy of the commons is to

Accepted Answer

A)   educate people in order to overcome the problem of rational ignorance.
B)   assign property rights so that someone owns the resource.
C)   take away property rights so that no one owns the resource.
D)   leave the market alone because the market will reach an equilibrium in which the efficient amount of the resource is used.
E)   None of the above answers is correct.F) B) and E)
G) A) and B) B

Question 8

The efficient quantity of a public good is the quantity at which marginal benefit is

Accepted Answer

A)   less than marginal cost.
B)   greater than marginal cost by any amount.
C)   greater than marginal cost by the maximum amount.
D)   zero.
E)   equal to marginal cost.F) A) and D)
G) A) and E)

Question 9

Which of the following goods is excludable and nonrival?

Accepted Answer

A)   A streetlight
B)   A bottle of Coke
C)   The Internet
D)   Food
E)   AirF) A) and B)
G) A) and C)

Question 10

The marginal benefit of a public good is the

Accepted Answer

A)   benefit of the last person's consumption.
B)   marginal benefit of the individual person who places the lowest value on the good, multiplied by the number of people in the economy.
C)   sum of the marginal benefits of all individuals at each quantity.
D)   marginal benefit of the individual person who places the highest value on the good, multiplied by the number of people in the economy.
E)   average of the marginal benefits of all the individuals at each quantity.F) B) and E)
G) B) and C)

Question 11

-Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Determine the marginal benefit to society of the second missile gunboat.

Accepted Answer

A)   $8 million
B)   $10 million
C)   $12 million
D)   $4 million
E)   $16 millionF) B) and E)
G) All of the above

Question 12

Which of the following goods is best described as nonexcludable?

Accepted Answer

A)   A Netflix subscription
B)   A university education
C)   A restaurant meal
D)   Flood-control levees
E)   A cow grazing in a pastureF) A) and C)
G) B) and D)

Question 13

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

Accepted Answer

A)   Granting individual transferable quotas.
B)   Setting a production quota.
C)   Subsidising use of the resource.
D)   Establishing property rights to the resource.
E)   None of the above is correct.F) B) and C)
G) A) and C)

Question 14

To hunters, deer in the woods are an example of a

Accepted Answer

A)   public resource.
B)   private good.
C)   natural monopoly.
D)   common resource.
E)   public good.F) A) and B)
G) A) and C)

Question 15

-The table above shows the marginal social benefit of fishing in the Mediterranean Sea. The marginal private cost of operating a fishing boat is the same for all producers; $300 per hour. The marginal social cost is twice the marginal private cost. With no government intervention, the market is

Accepted Answer

A)   underproducing by 100 tonnes of fish.
B)   catching the efficient quantity of fish.
C)   overproducing by 200 tonnes of fish.
D)   overproducing by 300 tonnes of fish.
E)   underproducing by 300 tonnes of fish.F) B) and E)
G) A) and C) D

Question 16

For a common resource, it is the case that

Accepted Answer

A)   MSC > MC
B)   MSB > MB
C)   MB > MSB
D)   MSC 
E)   None of the above answers is correct.F) B) and E)
G) B) and D)

Question 17

Suppose the marginal cost of the fourth unit of a public good is $20. If Mark and Judy are the only members of society, and they are willing to pay $10 and $11, respectively, for the fourth unit of the good, then the efficient quantity is

Accepted Answer

A)   4 or more units.
B)   zero units.
C)   3 units.
D)   More information is needed about the marginal benefits of the first, second and third units of the public good.
E)   None of the above answers is correct.F) B) and D)
G) A) and D)

Question 18

An AFL football game played in a completely full stadium is NOT a public good because it is

Accepted Answer

A)   not supplied by the government.
B)   nonexcludable and rival.
C)   excludable and nonrival.
D)   nonexcludable and nonrival.
E)   excludable and rival.F) B) and D)
G) A) and D)

Question 19

-Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Suppose the marginal cost of a missile gunboat is $8 million. What is the efficient quantity of missile gunboats?

Accepted Answer

A)   3 boats
B)   4 boats
C)   2 boats
D)   1 boat
E)   More information about whether the services provided by missile gunboats are rival or not is needed.F) A) and D)
G) A) and C)

Question 20

To find the economy's marginal benefit curve of a public good, we

Accepted Answer

A)   sum the prices consumers are willing to pay for different quantities of the good.
B)   sum the costs of the inputs used to produce the good.
C)   sum the quantities demanded at each individual price.
D)   sum the marginal benefits of each individual at each quantity.
E)   average the prices consumers are willing to pay for the same quantity of the good.F) B) and E)
G) B) and C)

Exam 11: Public Goods and Common Resources

To determine the efficient quantity of a public good to supply,

Correct AnswerverifiedShow Answer

Which of the following can bring about an efficient level of public goods being provided by the government?

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Voters typically have information only about issues that have a perceptible effect on their wellbeing and tend not to have information about other issues. Behaviour such as this is known as

Correct AnswerverifiedD

Why are private firms unable to produce public goods?

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The fact that Victoria's consumption of national defence does not preclude Tasmania from consuming the same national defence is an example of

Correct AnswerverifiedShow Answer

We determine the economy's marginal benefit curve for a public good or service by

Correct AnswerverifiedShow Answer

One way to overcome the tragedy of the commons is to

Correct AnswerverifiedB

The efficient quantity of a public good is the quantity at which marginal benefit is

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Which of the following goods is excludable and nonrival?

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The marginal benefit of a public good is the

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-Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Determine the marginal benefit to society of the second missile gunboat.

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Which of the following goods is best described as nonexcludable?

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

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To hunters, deer in the woods are an example of a

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-The table above shows the marginal social benefit of fishing in the Mediterranean Sea. The marginal private cost of operating a fishing boat is the same for all producers; $300 per hour. The marginal social cost is twice the marginal private cost. With no government intervention, the market is

Correct AnswerverifiedD

For a common resource, it is the case that

Correct AnswerverifiedShow Answer

Suppose the marginal cost of the fourth unit of a public good is $20. If Mark and Judy are the only members of society, and they are willing to pay $10 and $11, respectively, for the fourth unit of the good, then the efficient quantity is

Correct AnswerverifiedShow Answer

An AFL football game played in a completely full stadium is NOT a public good because it is

Correct AnswerverifiedShow Answer

-Paul and Paula are the only members of society. The table above gives their marginal benefits from missile gunboats, a public good. Suppose the marginal cost of a missile gunboat is $8 million. What is the efficient quantity of missile gunboats?

Correct AnswerverifiedShow Answer

To find the economy's marginal benefit curve of a public good, we

Correct AnswerverifiedShow Answer

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D

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B

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D

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