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Exam 11: Public Goods and Common Resources

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Question 21

Multiple Choice

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On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. An overcrowded picnic area is an example of

A) a private good.
B) a club good.
C) a Tragedy of the Commons.
D) public good.

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Question 22

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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 3.5 to 2.9 percent over the life of the system. The city should install the new lighting system if its cost does not exceed

A) $60,000.
B) $290,000.
C) $350,000.
D) $600,000.

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Question 23

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Recall the four types of goods. Are national defense and basic research the same type of good? Briefly explain.

The idea that "externalities arise because something of value has no price attached to it" is associated with

Are whales excludable? Are they rival in consumption? How do we classify whales in terms of the four types of goods?

Property rights are well established for

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?

The overuse of a common resource relative to its economically efficient use is called

A view of a spectacular sunset along a private beach is an example of a

One possible solution to the problem of protecting a common resource is to convert that resource to a private good.

The provision of public goods gives rise to

The provision of a public good generates a

Figure 11-1 -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

Examples of goods that are excludable include

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 $750. How many ferry trips should there be to maximize the total surplus of the four business owners?

Although national defense is currently a public good, economists who advocate small government generally agree that the U.S. should privatize national defense to increase the efficiency of the good.

Which of the following goods is rival in consumption and excludable?

Which of the following is correct regarding road tolls as a way to reduce traffic?

Which of the following is not a way for the government to solve the problem of excessive use of common resources?

Scenario 11-2 Consider the following goods: • fire-protection services provided by a fire department • a beautiful mural on the outside wall of a fire station • a firefighter's helmet -Refer to Scenario 11-2. Which of these goods is the best example of a public good? Briefly explain.