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Chapter 11 Additional Practice Questions



Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 

A vacation house in Colorado is
a.
not rival in consumption and excludable.
b.
rival in consumption and excludable.
c.
not rival in consumption and not excludable.
d.
rival in consumption and not excludable.
 

 2. 

If one person's use of a good diminishes another person's enjoyment of it, the good is
a.
rival in consumption.
b.
excludable.
c.
normal.
d.
exhaustible.
 

 3. 

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that
a.
over time, the aquifer is likely to be overused.
b.
each farmer has a sufficient incentive to conserve the water.
c.
state governments have an incentive to insure that their farmers do not overuse the water.
d.
resources would be used more efficiently if the government paid for the pumps farmers use to get the water.
 

 4. 

A decrease in the supply of televisions is represented by
a.
a leftward shift of the supply curve for televisions.
b.
a rightward shift of the supply curve for televisions.
c.
a flattening of the supply curve for televisions.
d.
a movement down and to the left along the supply curve for televisions.
 

 5. 

On holiday weekends thousands of people hike on national park hiking trails. Some trails become so overcrowded the benefit or value of hiking diminishes to zero. An overcrowded hiking trail is an example of
a.
a private good.
b.
a natural monopoly.
c.
a Tragedy of the Commons.
d.
public good.
 

 6. 

A lighthouse might be considered a private good if
a.
there is a second lighthouse nearby, thus preventing a monopoly.
b.
the owner of the lighthouse is able to exclude beneficiaries from receiving the benefits of the lighthouse.
c.
ships are able to enjoy the benefits of the lighthouse without paying for the benefit.
d.
a nearby port authority is able to avoid paying any fees to the lighthouse owner.
 

 7. 

As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because
a.
patents correct for an unknown portion of the externality.
b.
benefits are hard to measure.
c.
members of Congress are often experts in the sciences.
d.
the costs always exceed the benefits.
 

 8. 

If a road is congested, then use of that road by an additional person would lead to a
a.
negative externality.
b.
positive externality.
c.
Pigovian externality.
d.
free-rider problem with rush hour drivers stuck in traffic.
 

 9. 

Suppose that SmallCity, USA, is considering hiring an additional police officer. The reduction in crime is estimated to be worth $20 for each of SmallCity's 3,000 residents. What should the city do?
a.
Hire the police officer because additional safety is priceless.
b.
Hire the police officer if the cost of the new officer is less than $60,000.
c.
Do not hire the police officer because the costs exceed the benefits.
d.
Hire the police officer only if the benefit to the residents exceeds $3,000.
 

 10. 

Which of the following statements is not correct?
a.
Medical research can be an example of a public good.
b.
The private market will tend to undersupply public goods.
c.
The free-rider problem occurs when a good is nonexcludable.
d.
All goods provided by the government are public goods.
 

 11. 

The fish in the ocean are an example of a
a.
common resource.
b.
public good.
c.
private good.
d.
natural monopoly.
 

 12. 

Some economists estimate the value of human life by analyzing the risks that people are voluntarily willing to take and the compensation they require for those risks. Which of the following is an example of a career that economists would study?
a.
Certified Public Accounts at tax time
b.
window washers working on high-rise buildings
c.
economists
d.
professional golfers
 

 13. 

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that
a.
resources would be used more efficiently if the government produced the weapons.
b.
resources would be used more efficiently if private firms provided national defense.
c.
weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.
d.
national defense is rival in consumption and excludable, but weapons are not rival in consumption and not excludable.
 

 14. 

Due to the externalities associated with public goods and common resources,
a.
private markets will lead to an efficient allocation of resources.
b.
government intervention can potentially raise economic well-being.
c.
private markets will correct for the gain or loss to consumer surplus.
d.
the free-rider problem is eliminated.
 

 15. 

The value and cost of goods are easiest to determine when the goods are
a.
private goods.
b.
public goods.
c.
common resources.
d.
natural monopolies.
 

 16. 

Local producers benefit when tariffs are placed on foreign goods.  A recent example of this is
a.
The increase in tariffs imposed on imported Japanese cars.
c.
The rising price of gasoline.
b.
The request by European steelmakers to impose tariffs on Chinese steel imports.
d.
Falling home prices.
 

 17. 

The U.S. patent system
a.
makes general knowledge excludable.
b.
makes specific, technical knowledge excludable.
c.
creates a disincentive to invent.
d.
Both a and b are correct.
 

 18. 

Suppose a human life is worth $10 million. Installing a better lighting system in the city park would reduce the risk of someone being murdered there from 2.6 to 1.9 percent over the life of the system. The city should install the new lighting system if its cost does not exceed
a.
$70,000.
b.
$190,000.
c.
$260,000.
d.
$10,000,000.
 

 19. 

An example of a private good would be
a.
cable TV service.
b.
a tornado siren.
c.
clothing.
d.
a sunset.
 

 20. 

Tom is a non-union employee at General Power. Eight-five percent of the employees at General Power are unionized. The union at General Power has negotiated very good benefits. Even though he is not a union member and he does not have to pay union dues, Tom receives all the benefits that the union has negotiated. Tom’s behavior is an example of
a.
rivalry.
b.
a barrier to entry.
c.
free riding.
d.
Taft-Hartley opposition.
 

 21. 

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.
 

 22. 

A good is excludable if
a.
one person's use of the good diminishes another person's enjoyment of it.
b.
the government can regulate its availability.
c.
it is not a normal good.
d.
people can be prevented from using it.
 

 23. 

Basic research is a public good partly because it
a.
is difficult to exclude those who might benefit from it.
b.
is used to develop public goods.
c.
always benefits developed countries at the expense of developing countries.
d.
is a good that is rival in consumption.
 

 24. 

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.
 

 25. 

The U.S. government protects fish, a common resource, by
a.
subsidizing the fishing industry.
b.
heavily taxing competing industries.
c.
selling fishing licenses and regulating fish lengths.
d.
None of the above is correct.
 

 26. 

Respondents to cost-benefit surveys
a.
are unable to evaluate the effect of the project on their personal satisfaction.
b.
typically do not receive a direct benefit from government projects.
c.
have a difficult time identifying explicit costs.
d.
have little incentive to tell the truth.
 

 27. 

The market does not provide national defense because
a.
it is impossible to prevent any single person from enjoying the benefit of national defense.
b.
the fixed cost of national defense is too high.
c.
the necessary resources for national defense are not available in the private sector.
d.
All of the above are correct.
 



 
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