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Exam 11: Public Goods and Common Resources

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Question 21

Multiple Choice

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Which of the following is a disadvantage of government provision of a public good?

A) The government lacks information about what people are willing to pay for the good.
B) The government does not provide enough of any public good.
C) The private sector can provide all public goods at a lower cost.
D) None of the above is a disadvantage.

E) A) and C)
F) None of the above

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Question 22

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Each of the following explains why cost-benefit analysis is difficult except

A) there is no price with which to judge the value of a public good.
B) surveys are often biased and unreliable.
C) it is difficult to identify all factors that influence costs and benefits of public goods.
D) government projects rarely have sufficient funding to complete them on time.

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

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Question 23

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

The U.S. patent system

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 $360 and the families have agreed to split the cost of installing the streetlights equally. If the residents choose to install the number of streetlights that will maximize total surplus from the streetlights, how much total surplus will the Greene family receive?

Under which of the following scenarios would a park be considered a club good?

Which of the following is an approach used by economists to calculate the value of a human life?

If Dave and Jesse are the only two fishermen in town and neither is bothered by the other's fishing, the lake they fish in is not a common resource.

It would always be a mistake to view

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 per day and the 4 business owners have agreed to split the costs of the ferry trips equally. Which of the following statements is correct?

Is a tornado siren excludable? Is it rival in consumption? How do we classify a tornado siren in terms of the four types of goods?

Tolls are not effective in altering people's incentives to drive during rush hour.

Which of the following is usually true about government-provided goods?

Which of the following statements is not correct?

The degradation of the environment from litter is a

Figure 11-1 -Refer to Figure 11-1. A gym membership at a gym that always has space in classes and on machines is an example of the type of good represented by Box

You and your friends watch a movie in your bedroom. For you and your friends, the enjoyment that you get from watching the movie is not rival in consumption.

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except

Is a congested nontoll road excludable? Is it rival in consumption? How do we classify a congested nontoll road in terms of the four types of goods?

What is the main difficulty facing cost-benefit analysts when they attempt to evaluate the worthiness of proposed public projects?