Full Test Bank Public Goods And Common Resources Chapter.11 - Principles of Microeconomics ANZ Edition Test Bank by Joshua Gans. DOCX document preview.
CHAPTER 11 – Public goods and common resources
TRUE/FALSE
1. In modern industrialised economies there are goods that can be consumed without paying for them.
DIF: Easy TOP: The different kinds of goods
2. Prices will always regulate consumption adequately because of the different types of goods in the economy.
DIF: Easy TOP: The different kinds of goods
3. Businesses that buy illegally harvested timber products from tropical rainforests are influenced by the external effect of their decision.
DIF: Easy TOP: The different kinds of goods
4. A picnic table is an example of a public good.
DIF: Easy TOP: The different kinds of goods
5. When one person enjoys the benefit of the legal system, he reduces its benefit to others.
DIF: Easy TOP: Public goods
6. General scientific knowledge is so valuable, that a private company generating this knowledge would never need a government subsidy to be profitable.
DIF: Moderate TOP: Public goods
7. A museum exhibition is excludable because it is possible to prevent someone from seeing the show.
DIF: Easy TOP: Common resources
8. A fireworks display is a rival good because one person’s enjoyment of the fireworks does not reduce anyone else’s enjoyment.
DIF: Easy TOP: Public goods
9. A free rider is someone who receives the benefit of a good and pays for it through taxes.
DIF: Moderate TOP: The free-rider problem
10. Only goods that are produced in markets have value to society.
DIF: Easy TOP: The free-rider problem
11. In nearly all cases the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide.
DIF: Moderate TOP: Public goods
12. The government subsidises basic research in mathematics, physics, economics and other fields in order to correct for private market failure.
DIF: Easy TOP: Basic research
13. The government developed the patent system so that private inventors could make a reasonable profit from otherwise rival goods.
DIF: Moderate TOP: Basic research
14. Raising the living standards of the poor is a public good if people are not concerned about poverty.
DIF: Moderate TOP: Fighting poverty
15. Some goods can switch between being public goods and private goods, depending on the circumstances.
DIF: Easy TOP: Public goods
16. A New Zealand private nature reserve that holds deer for tourism and hunting, has converted a common resource into a private good.
DIF: Moderate TOP: The free-rider problem
17. Suppose the owners of a lighthouse demand payments from a nearby port for the lighthouse service, threatening to turn off the lighthouse otherwise. The lighthouse is now closer to a private good.
DIF: Easy TOP: Are lighthouses public goods?
18. If an entrepreneur provides a service that people enjoy without paying for, but can be excluded from the service, these people are known as free riders.
DIF: Moderate TOP: The free-rider problem
19. Government needs only to point out which goods the private markets are failing to provide efficiently and then allow the private markets to correct themselves.
DIF: Easy TOP: Public goods
20. The efficient provision of public goods is more difficult than the efficient provision of private goods.
DIF: Moderate TOP: The difficult job of cost–benefit analysis
21. Apparently, human life does have an implicit dollar value, due to the observable fact that people take voluntary risks every day.
DIF: Moderate TOP: The difficult job of cost–benefit analysis
22. A poor way to value human life is to measure how much extra money a person needs to be paid to take on a risky job.
DIF: Moderate TOP: The difficult job of cost–benefit analysis
23. Cost–benefit analysis always fails to include free goods like clean air as benefits.
DIF: Easy TOP: The difficult job of cost–benefit analysis
24. If cutting down a native forest causes many rare animals to become extinct, a cost–benefit analysis would still class this as a cost, even if there is no market price for species survival.
DIF: Moderate TOP: The difficult job of cost–benefit analysis
25. Private ownership of a common resource works well when the resource is scarce.
DIF: Easy TOP: The Tragedy of the Commons
26. If Jack and Joe are the only two fishermen in town and neither is bothered by the other’s fishing, the fishing lake is not a common resource.
DIF: Moderate TOP: The Tragedy of the Commons
27. When a common resource like grazing land, is plentiful and everyone can get all the good grazing land they want, a tragedy of the commons exists.
DIF: Easy TOP: The Tragedy of the Commons
28. All animals with a commercial value are protected from extinction by market forces.
DIF: Moderate TOP: Case study: Why the cow is not extinct
29. Private market failure to optimally allocate common resources is a problem that has only become evident in the last few centuries.
DIF: Easy TOP: The Tragedy of the Commons
30. In the Tragedy of the Commons, joint action among the individual citizens would be necessary to solve their common resource problem, if government does not intervene.
DIF: Moderate TOP: The Tragedy of the Commons
31. Government intervention becomes increasingly necessary to solve the problem of common resources as the population grows larger.
DIF: Easy TOP: The Tragedy of the Commons
32. Roads can be considered either public goods or common resources, depending on how congested they are.
DIF: Moderate TOP: Congested roads
33. More roads do not solve traffic problems because they encourage people to live farther from work and thus use more road space.
DIF: Easy TOP: Congested roads
34. Property rights are important to solving some of the problems of goods that the market does not provide adequately.
DIF: Easy TOP: Conclusion: The importance of property rights
35. Fish are public goods because there are always enough left to keep reproducing and thus stocks never run out.
DIF: Easy TOP: Fish, whales and other wildlife
36. Countries that have completely outlawed domestic elephant hunting are finally seeing elephant populations start to rise.
DIF: Easy TOP: Fish, whales and other wildlife
37. The profit motive that stems from private ownership has proven to be detrimental to elephant populations.
DIF: Easy TOP: Fish, whales and other wildlife
38. Free-to-air television is an example of a club good.
DIF: Easy TOP: The different kinds of goods
39. Provision of electricity is a natural monopoly, but after a certain point it becomes a private good.
DIF: Difficult TOP: The different kinds of goods
40. Cost–benefit analysis can account for risk by adjusting benefits and costs by their probability of occurrence.
DIF: Moderate TOP: The difficult job of cost–benefit analysis
MULTIPLE CHOICE
1. Markets work well for some goods, but poorly for others. For which of the following goods would markets be expected to work well?
A. | clean air |
B. | restaurants |
C. | wild elephants |
D. | public healthcare |
DIF: Easy TOP: The different kinds of goods
2. A good is rival if:
A. | one person’s use of the good diminishes another person’s enjoyment of it |
B. | the government regulates its availability |
C. | it is not a normal good |
D. | people can be prevented from using it |
DIF: Easy TOP: The different kinds of goods-7
3. Private goods are:
A. | excludable and rival |
B. | non-excludable and rival |
C. | excludable and non-rival |
D. | non-excludable and non-rival |
DIF: Easy TOP: The different kinds of goods
4. Which of the following would be considered a private good?
A. | a telecommunications service |
B. | a mobile phone advertisement |
C. | a mobile phone case |
D. | a telecommunications tower |
DIF: Easy TOP: The different kinds of goods
5. A huge, very busy museum in Europe is:
A. | non-excludable and rival |
B. | non-excludable and non-rival |
C. | excludable and rival |
D. | excludable and non-rival |
DIF: Moderate TOP: The different kinds of goods
6. Goods that are non-excludable and non-rival are:
A. | public goods |
B. | private goods |
C. | natural monopolies |
D. | common resources |
DIF: Easy TOP: Public goods
7. The market does not provide national defence because:
A. | national defence is a public good |
B. | national defence is subject to free-riders |
C. | national defence is a common resource |
D. | the value of national defence is difficult to measure |
DIF: Moderate TOP: National defence
8. Common resource goods are:
A. | rival and non-excludable |
B. | rival and excludable |
C. | non-rival and excludable |
D. | non-rival and non-excludable |
DIF: Easy TOP: The Tragedy of the Commons
9. Which of the following would be considered a common resource good?
A. | cable television |
B. | bottled natural mineral water |
C. | a congested public park |
D. | electricity consumption by a household |
DIF: Easy TOP: The Tragedy of the Commons
10. If the government allows landowners to kill a number of tigers that roam on their property and sell their remains then:
A. | poachers will try to kill as many tigers as possible |
B. | landowners have more incentive to protect tigers on their land |
C. | landowners have more incentive to try to kill as many tigers as possible |
D. | poachers will buy land to protect the tigers |
DIF: Moderate TOP: Fish, whales and other wildlife
11. What characteristics do public goods and common resources have in common?
A. | both types of good are non-rival |
B. | both types of good are excludable |
C. | both types of good are rival |
D. | both types of good are non-excludable |
DIF: Easy TOP: The different kinds of goods
12. For both public goods and common resources, an externality arises because:
A. | something of value has no price attached to it |
B. | the goods are undervalued by society |
C. | the social optimum level of output is greater than market equilibrium |
D. | all of the above are true |
DIF: Easy TOP: The different kinds of goods
13. If tuna fish are an oceanic common resource then:
A. | preventing over-harvest won’t need international cooperation |
B. | fishers will try to limit their catches without government regulations |
C. | enforcing agreements to limit fishing will be difficult |
D. | all of the above |
DIF: Easy TOP: Fish, whales and other wildlife
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 wellbeing |
C. | private markets will correct for the gain or loss to consumer surplus |
D. | all of the above are true |
DIF: Easy TOP: Some important common resources
15. Because the benefit each citizen receives from having an educated community is a public good:
A. | the free-rider problem causes the private market to undersupply education to the community |
B. | the government can potentially help the market reach a socially optimal level of education |
C. | a tax increase to pay for education could potentially make the community better off |
D. | all of the above are true |
DIF: Moderate TOP: Public goods
16. An example of a market failure associated with the provision of public good in the private market is:
A. | free-riders pay too much for the good, so it is undersupplied |
B. | free-riders don’t pay for the good, so it is undersupplied |
C. | free-riders pay too much for the good, so it is oversupplied |
D. | free-riders don’t pay for the good, so it is oversupplied |
DIF: Easy TOP: The free-rider problem
17. The government provides public goods because:
A. | private markets are incapable of producing public goods |
B. | markets are always better off with some government oversight |
C. | free-riders make it difficult for private markets to supply the socially optimal quantity |
D. | external benefits will occur to private producers |
DIF: Easy TOP: The free-rider problem
18. Basic research is a public good 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 rival good |
DIF: Easy TOP: Basic research
19. The Australian patent system:
A. | makes both general and technical knowledge excludable |
B. | makes only technical knowledge excludable |
C. | creates a disincentive to invent |
D. | does all of the above |
DIF: Moderate TOP: Basic research
20. As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because:
A. | members of parliament are often experts in the sciences |
B. | patents correct an unknown portion of the externality |
C. | benefits are hard to measure |
D. | all of the above are true |
DIF: Moderate TOP: Basic research
21. National defence and basic research have in common:
A. | that they are both common resources |
B. | that they are both difficult to value |
C. | that they are both lucrative for the companies that provide them |
D. | that they are both natural monopolies |
DIF: Moderate TOP: Some important public goods
22. Which of the following statements is true?
A. | no single individual can eliminate poverty because the problem is so large |
B. | private charities use taxes to escape the free-rider problem |
C. | there would be no poverty problem if it was left up to private charity |
D. | everyone agrees on what role the government should play in fighting poverty |
DIF: Moderate TOP: Fighting poverty
23. If everyone prefers a society without poverty, then which of the following statements is true:
A. | taxing private charities will make everyone better off |
B. | taxing the wealthy to increase living standards for the poor only makes the poor better off |
C. | taxing the wealthy to increase living standards for the poor makes everyone better off |
D. | taxing the wealthy to increase living standards for the poor only makes the rich worse off |
DIF: Moderate TOP: Fighting poverty
24. Private markets usually fail to provide lighthouses because:
A. | lighthouses cost too much to build, relative to their benefits |
B. | government intervention makes it hard for private lighthouse owners to compete in the market |
C. | ship captains have incentives to use lighthouses without paying |
D. | lighthouses are valued very little by ship captains these days |
DIF: Easy TOP: Some important public goods
25. The free-rider problem is a problem of:
A. | too many people needing the same good |
B. | common resource goods not being subject to property rights |
C. | incentives |
D. | people not revealing their true preferences |
DIF: Difficult TOP: Public goods
26. Because of the free-rider problem, respondents to cost–benefit surveys:
A. | are unable to evaluate the effect of the project on their personal satisfaction. |
B. | are typically not benefited directly by government projects |
C. | have a difficult time identifying explicit costs |
D. | have little incentive to tell the truth |
DIF: Moderate TOP: The difficult job of cost–benefit analysis
27. A town engineer comes to the town council with a proposal to build a traffic light at a certain intersection that currently has a stop sign. The benefit of the traffic light is increased safety. In fact, the traffic light will reduce the incidence of fatal traffic accidents by 50 per cent per year. Which of the following statements is true?
A. | the project should definitely be accepted |
B. | the full cost of the stop light will be relatively small since it only includes the purchase and installation costs |
C. | the decision to install the light is likely to require a complex evaluation of the trade-off between the worth of human life and the lost time waiting for the light to change signals |
D. | the cost will invariably outweigh the benefit |
DIF: Difficult TOP: The difficult job of cost–benefit analysis
28. The government is deciding whether to build a new $2 billion highway from one side of the city to the other. Some business and consumer groups are questioning the value that such an expensive highway will bring to the city. The government says that it has done a cost–benefit analysis which shows that the highway will bring a slightly positive return, and therefore the highway should be built. Which of the following statements is true?
A. | Cost–benefit analyses always provide an accurate valuation of a project, so the highway should be built. |
B. | Cost–benefit analyses do not always reflect people’s true valuation of a project, so the highway should not be built. |
C. | It is not possible to put a dollar value on a highway, so the highway should be built. |
D. | Cost–benefit analyses are rough approximations at best, so the highway should only be built if very strong evidence in favour is provided. |
DIF: Difficult TOP: The difficult job of cost–benefit analysis
29. Tim works for the government and is implementing a new government policy to set up spacious yoga studios at all state primary schools. The general public will be able to attend classes in the studios but Tim is still is trying to decide on a pricing structure. What pricing structure should Tim suggest the government adopt for the studios and why?
A. | participants shouldn’t pay for their own class because a yoga class is a private good |
B. | participants should pay for the classes out of their taxes because yoga classes are a public good |
C. | participants shouldn’t pay for their own class because a yoga class is a common resource |
D. | participants should each pay for their own class because yoga classes are excludable and rival |
DIF: Difficult TOP: The different types of goods
30. For the purpose of cost–benefit analysis, the value of a human life is sometimes calculated on the basis of:
A. | the risks that a person voluntarily exposes herself to in her job and/or recreational choices |
B. | the value of each individual’s assets |
C. | an infinite value for each life |
D. | the amount of resources required to adequately sustain life |
DIF: Moderate TOP: The difficult job of cost–benefit analysis
31. Economists can get some sense about what value people put on their own lives by:
A. | evaluating their total asset portfolio |
B. | studying the risk they are willing to take in their investment decisions |
C. | comparing wages in risky and less risky occupations, controlling for other determinants of wages |
D. | None of the above will lead to sensible results |
DIF: Moderate TOP: The difficult job of cost–benefit analysis
32. In the 1950s in Australia, estuarine crocodiles were hunted almost to extinction for their leather. This means the crocodiles were a:
A. | private good |
B. | public good |
C. | common resource |
D. | club good |
DIF: Moderate TOP: Fish, whales and other wildlife
33. What is necessary to convert a wireless internet connection into a common resource?
A. | low connection fees |
B. | high connection fees |
C. | no encryption on the network |
D. | encryption on the network |
DIF: Moderate TOP: The free-rider problem
34. To determine if a good is a common resource or a public good, we need to know:
A. | if the good is provided by the government |
B. | if my use of the good reduces its availability to you |
C. | if the good can be patented |
D. | if the good is very expensive to produce |
DIF: Easy TOP: The different kinds of goods
35. Once a common resource is available for consumption, policymakers need to be concerned with:
A. | making sure everyone gets a fair chance to consume |
B. | how much is consumed |
C. | creating laws that will completely forbid consumption, because the environment is priceless |
D. | none of the above, because common resources are optimally provided in private markets |
DIF: Easy TOP: The Tragedy of the Commons
36. One way to eliminate the Tragedy of the Commons is to:
A. | increase law enforcement in public areas |
B. | limit access to the commons |
C. | increase access to the commons |
D. | provide more public land for recreation |
DIF: Easy TOP: The Tragedy of the Commons
37. Once it becomes obvious that a common resource is being overused:
A. | market forces cause the use of the resource to shift to a sustainable level |
B. | society voluntarily limits its use of the good |
C. | it continues to be overused because individuals have no incentive to reduce their use |
D. | the good becomes a natural monopoly |
DIF: Easy TOP: The Tragedy of the Commons
38. The Tragedy of the Commons occurs because:
A. | a common resource is under-utilised |
B. | a common resource is rival in consumption |
C. | crimes are committed in public places |
D. | common resources are subject to exclusionary rules |
DIF: Easy TOP: The Tragedy of the Commons
39. When private costs differ from social costs, which of the following must be present?
A. | excludable resources |
B. | a negative externality |
C. | a natural monopoly |
D. | poor profit incentive to capitalise on the resource |
DIF: Easy TOP: The Tragedy of the Commons
40. When one person uses a common resource, she diminishes other people’s enjoyment of it. This is an example of:
A. | a market force |
B. | a negative externality |
C. | the ‘invisible hand |
D. | excludability |
DIF: Easy TOP: The Tragedy of the Commons
41. The Tragedy of the Commons will be evident when a growing number of crocodile hunters leads to the loss of crocodiles in many rivers: Possible solutions to this problem include:
A. | providing only a limited number of hunting permits to the hunters |
B. | internalising the externality by using crocodile farms to turn the animals into a private good |
C. | reduce the hunting season for crocodiles |
D. | all of the above could be done |
DIF: Moderate TOP: Fish, whales and other wildlife
42. Pollution of water and air resources:
A. | can be solved by addressing the positive externalities |
B. | can be viewed as an example of a common resource problem |
C. | are viewed as a bastion of efficient market processes |
D. | can be solved by taxes on swine, called Pigovian taxes |
DIF: Easy TOP: Clean air and global warming
43. The Tragedy of the Commons occurs with whales because:
A. | whales are a public good |
B. | whaling is a cruel practice |
C. | whalers often don’t have property rights to whales |
D. | the private incentives of the whalers are in line with social incentives |
DIF: Easy TOP: Fish, whales and other wildlife
44. If the use of a common resource is not regulated, it:
A. | is a natural monopoly |
B. | is a public good |
C. | is a private good |
D. | will be overused |
DIF: Easy TOP: The Tragedy of the Commons
45. Overuse and pollution of rivers can potentially be resolved by governments that:
A. | deregulate use |
B. | convert the common resource to a private good |
C. | subsidise use |
D. | do all of the above |
DIF: Easy TOP: The Tragedy of the Commons
46. Why might Ellen decide not to put on a fireworks show she knows many people will enjoy?
A. | Fireworks are dangerous and thus they cause externalities |
B. | Fireworks are a common resource and she is worried they will be overused |
C. | Fireworks are a public good and she doesn’t want any free-riders |
D. | Fireworks are a club good and she hasn’t assigned any property rights |
DIF: Easy TOP: The free-rider problem
47. Common resources get overused typically because:
A. | government subsidies encourage users to exploit it |
B. | there isn’t enough fish for all the fishing trawlers |
C. | users ignore the externality they impose on others |
D. | common resources are excludable and rival |
DIF: Easy TOP: The Tragedy of the Commons
48. Oil deposits are often considered a common resource. If this is true, then for a group of land owners over an oil pool:
A. | oil pools are an excludable good |
B. | each land owner has an incentive to extract as much oil as they can, without considering the effect on other land-owners |
C. | oil extraction should be subsidised |
D. | all of the above are true |
DIF: Moderate TOP: Oil deposits
49. Market failure with common resources occurs because:
A. | the government susbidises everyone’s consumption of the resource |
B. | it is difficult to obtain international agreements with fisheries |
C. | ship captains avoid ports without lighthouses |
D. | users impose a negative externality on other people who share use of the resource |
DIF: Easy TOP: The Tragedy of the Commons
50. Uncongested roads are a good example of a:
A. | public good |
B. | car prices that are too low |
C. | common resource |
D. | a toll road |
DIF: Easy TOP: Congested roads
51. If a road is uncongested, then use of that road by an additional person would lead to a:
A. | negative externality |
B. | positive externality |
C. | natural monopoly problem |
D. | it would have no effect |
DIF: Easy TOP: Congested roads
52. Congested roads are a good example of a:
A. | public good |
B. | car prices that are too low |
C. | common resource |
D. | toll road |
DIF: Easy TOP: Congested roads
53. What effect would a tax on petrol have?
A. | It would have no effect on driving behaviour |
B. | It would discourage people from driving on congested roads only |
C. | It would discourage people form driving on uncongested roads only |
D. | It would discourage people from driving on congested and uncongested roads |
DIF: Moderate TOP: Congested roads
54. One example of private provision of a public good is:
A. | everyone paying for free-to-air television through taxes |
B. | everyone paying for television according to the programs they watch |
C. | broadcasters showing advertisements during their programs |
D. | the government requiring households to pay broadcasters a subscription |
DIF: Moderate TOP: Private provision of public goods
55. Proposals to use road tolls in an effort to reduce traffic congestion are often rejected by the public because:
A. | there is no longer sufficient government intervention |
B. | they tax only those who chose to drive on the toll roads |
C. | they allow the rich to drive more than the poor |
D. | all of the above are true |
DIF: Easy TOP: Congested roads
56. If one thinks that driving privileges should be distributed equally:
A. | toll roads could be used as long as each car owner had an equal endowment of money to pay for road tolls |
B. | people with more expensive cars should be charged a higher toll |
C. | there is no solution to the congested road problem |
D. | toll roads would offer no solution to the problem of congested roads |
DIF: Moderate TOP: Congested roads
57. If all citizens in a certain city were given identical debit cards to pay for their use of toll roads, which of the following statements would be true if the debit cards could be sold privately from person to person?
A. | this would be a very egalitarian policy |
B. | this system would end up being a redistribution of income from those that drive more to those that drive less |
C. | this system could potentially be a redistribution of income from the rich to the poor if the poor drive less |
D. | all of the above are true |
DIF: Moderate TOP: Congested roads
58. The ocean remains one of the largest unregulated resources because:
A. | many countries have access to the ocean |
B. | it is difficult to get international cooperation among countries that hold different values |
C. | the oceans are so vast that enforcing any agreements would be difficult |
D. | all of the above are true |
DIF: Easy TOP: Fish, whales and other wildlife
59. Why do elephants face the threat of extinction while cows do not?
A. | cattle are a valuable source of income for many people and elephants have no market value |
B. | there is a high demand for products that come only from the cow |
C. | there are still lots of cattle that roam free, while most elephants are in zoos |
D. | cattle are owned by ranchers, while elephants are owned by no-one |
DIF: Easy TOP: The importance of property rights
60. Jack, Aaron and Katie have a new television, which has stopped working. For a long time, no one takes the television to be fixed. Why might this have occurred?
A. | The television is considered a private good but they can’t remember who it belongs to |
B. | The television is considered a public good and they are each worried the others will free ride if they pay the repair fee |
C. | The television is considered a common resource and they are worried it will break again from being used too much |
D. | The television is considered a club good and they are worried about the negative externality from watching too much television |
DIF: Moderate TOP: Conclusion: The importance of property rights
61. In many countries in Africa, elephants roam freely. Each individual African elephant poacher has:
A. | a strong incentive to kill as many elephants as he can find |
B. | a strong incentive to protect the elephants |
C. | the ability to save the elephants |
D. | all of the above |
DIF: Easy TOP: Conclusion: The importance of property rights
62. Many species of animals are common resources and many must be protected by law to keep them from extinction. Why is the cow not one of these endangered species, even though there is such a high demand for beef?
A. | cows reproduce at a high rate and have adapted well to their environment |
B. | public policies have been implemented to protect cows from predators and diseases |
C. | cows are privately owned and many endangered species are owned by no-one |
D. | there is a natural ecological balance between the birth rate of cows and human consumption |
DIF: Moderate TOP: Conclusion: The importance of property rights
63. It is sometimes possible for households to use their neighbours’ wireless internet without permission. What type of problem is encountered in this situation and what might be done about it?
A. | Without a password the internet is a public good and the neighbours should impose a password to make it more like a private good |
B. | Without a password the internet is a common resource and the neighbours should impose a password to make it more like a club good |
C. | Without a password the internet is a common resource and the neighbours should demand the government impose a tax on wifi |
D. | The neighbours should ascertain who has the property rights in order to figure out the optimal solution |
DIF: Moderate TOP: Conclusion: The importance of property rights
64. A good solution to saving the tiger from extinction would be to:
A. | outlaw the sale of tiger bone |
B. | tax the sale of tiger hides |
C. | develop policies that make tigers more like a private good |
D. | regulate the use of traditional Asian medicines that use tiger bone |
DIF: Moderate TOP: Conclusion: The importance of property rights
65. It is common knowledge that many national parks have become overused. One possible solution to this problem is to:
A. | assign rights to park entrances |
B. | build more roads to other natural attractions |
C. | introduce a quota on household visits to the park |
D. | vary entrance fees according to whether it is peak holiday season, a low season or a special event |
DIF: Moderate TOP: The Tragedy of the Commons
66. If it is common knowledge that a given national park has become overused, why might raising the entrance fee to the park NOT solve the problem of overcrowding?
A. | no-one would go to the park if the fees were increased |
B. | additional revenue from the higher fee might not be used for the betterment of the park |
C. | the lower usage might more than offset the higher entrance fees, resulting in a loss of revenue |
D. | after they have spent their time and money in travelling to the park, people might not be discouraged from visiting the park by a higher entrance fee |
DIF: Difficult TOP: The Tragedy of the Commons
67. Markets may allocate natural resources wastefully if:
A. | people get too greedy |
B. | property rights are neither well defined nor enforced |
C. | catching poachers is very easy |
D. | All of the above are possible |
DIF: Easy TOP: Conclusion: The importance of property rights
68. The private market would not supply the optimal amount of national defence because:
A. | private citizens don’t value national defence enough to cover the cost of private provision |
B. | no-one has the right to attach a price to it and profit from its use |
C. | private suppliers are unable to produce national defence |
D. | the government would quickly take advantage of the profit opportunity and undersell to the private suppliers |
DIF: Moderate TOP: National defence
69. Suppose fish stocks in a lake are being overfished by fishers. To reduce the overfishing problem the government could:
A. | establish a tradeable, property right entitlement to the fish |
B. | pay to have more fish transported to the lake |
C. | increase the length of the fishing season |
D. | do all of the above |
DIF: Easy TOP: Fish, whales and other wildlife
70. A good that is not subject to property rights is often:
A. | overused |
B. | stolen |
C. | underutilised |
D. | taxed |
DIF: Easy TOP: Conclusion: The importance of property rights
71. Fire protection is a good example of a natural monopoly good because:
A. | it is non-excludable |
B. | it is rival |
C. | protecting an extra house is unlikely to reduce the protection available to others |
D. | all of the above are true |
DIF: Easy TOP: The different kinds of goods
72. Residents of Hang-Zhou, China, like seeing fireworks during their Chinese New Year celebration. Each of the city’s one million residents places a value of $1 on the fireworks experience. The cost of providing the fireworks is $250 000. Which of the following statements is most correct?
A. | because the collective benefits exceed the cost, the private market will provide an efficient number of fireworks |
B. | an entrepreneur in Hang-Zhou is likely to provide some amount of fireworks for residents of the city and the provision level is likely to be efficient |
C. | fireworks are not excludable so private markets will not produce an efficient outcome |
D. | because China is a communist country, market incentives are irrelevant to how people behave |
DIF: Moderate TOP: Public goods
73. When a good is characterised by non-excludability, it is theoretically possible for the government to:
A. | increase the wellbeing of residents by raising taxes to provide the good |
B. | eliminate the free-rider problem |
C. | reach the efficient outcome in spite of private market failure to do so |
D. | do all of the above |
DIF: Easy TOP: Public goods
74. Cost–benefit analysis is important in determining the role of government in our economy because:
A. | the government should provide all goods in which benefits exceed costs |
B. | cost–benefit analysis identifies the possible gains to society from government provision of a particular good |
C. | markets for private goods are not able to effectively assign costs and benefits |
D. | cost–benefit analysis identifies market failure |
DIF: Moderate TOP: The difficult job of cost–benefit analysis
75. Many people around the world are worried about global warming, yet the consumption of oil-derived products is not falling. One possible solution to this problem could be:
A. | for the United Nations to outlaw the extraction of oil |
B. | for oil-rig workers to work together to reduce the amount of oil they extract from the ground |
C. | for environmental groups to bargain with oil producers, as per the Coase theorem |
D. | for companies to internalise the externality by joining together and acting as a single company |
DIF: Moderate TOP: Some important common resources
76. Some workers are in occupations where the risk of death is higher than others. These risks can be used to evaluate the value of human life. You would expect these workers to:
A. | require higher rates of pay than other safer jobs using the same skills |
B. | require lower rates of pay than other safer jobs using the same skills |
C. | have the same rate of pay as other safer jobs using the same skills |
D. | all of the above |
DIF: Easy TOP: The difficult job of cost–benefit analysis
77. The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of diet soft drinks is 0.0005. The cost of imposing a regulation that would ban this chemical is $18 million. If each person saved has a value equal to $10 million, how many people must the policy affect in order for benefits to exceed costs?
A. | 3600 |
B. | 1800 |
C. | 600 |
D. | 100 |
DIF: Difficult TOP: The difficult job of cost–benefit analysis
78. It is often important in cost–benefit analysis to distinguish between non-market values and direct values attached to direct use. Why is it important to include non-market values in an analysis?
A. | non-market values are easier to estimate than direct use values |
B. | non-market values are more accurate than market values |
C. | non-market values reflect supply and demand more accurately |
D. | non-market values reflect the costs and benefits to society, not just to private individuals |
DIF: Difficult TOP: The difficult job of cost–benefit analysis
79. Andy is deciding whether to undertake some scientific research into developing a new supercomputer. He believes he can make a lot of money from his research. What are some problems he might encounter in obtaining remuneration for his work?
A. | the possibility that other computer engineers might free ride off his research |
B. | the government might use his supercomputer for different ends to what he was intending |
C. | the supercomputer is a private good so he will have to obtain a patent for it |
D. | there is not enough information to answer this question |
DIF: Moderate TOP: The Tragedy of the Commons
80. Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item from the menu and they will share all dishes. When the final bill for the meal comes, they decide that they will split the cost evenly among each of the people at the table. In this particular case, a Tragedy of the Commons problem is likely because:
A. | each person has an incentive to eat as fast as possible, since their individual rate of consumption will not affect their individual cost |
B. | there is a consumption externality associated with eating the food on the table |
C. | when one person eats, he may not take into account how his choice affects his friends |
D. | all of the above are true |
DIF: Difficult TOP: The Tragedy of the Commons
81. Nico, Mikey and Jess are on a road trip and are trying to decide how much food to take with them in the car. They decide that whoever values the food most highly will have to go and buy it for everyone before they depart. One problem with this approach is:
A. | Nico, Mikey and Jess might not like the same foods |
B. | all three friends might reduce the value they report that they place on the food to avoid having to buy it |
C. | none of the friends can adequately report how hungry they feel before the trip |
D. | the food is a common resource so they won’t be able to buy an adequate quantity of it |
DIF: Moderate TOP: The difficult job of cost–benefit analysis
82. Ten friends who love to ski decide to pool their financial resources and equally share the cost of a one-week timeshare unit in the Blue Mountains of New South Wales. If lift lines at the ski resort become more congested when these 10 additional people start to ski, then:
A. | use of the ski resort by all of these ten new skiers will yield a negative externality |
B. | the ski resort can reduce the congestion externality by raising lift ticket prices |
C. | an increase in lift ticket prices could be viewed as a Pigovian tax on the externality of congestion |
D. | all of the above are true |
DIF: Difficult TOP: The Tragedy of the Commons
83. The most effective ways to solve highway congestion is to:
A. | to increase tolls as roads become busier and reduce tolls as the roads become less busy |
B. | to have a standard toll price |
C. | have an inner-city rail network |
D. | to reduce tolls as roads become busier and increase tolls as the roads become less busy |
DIF: Easy TOP: Congested roads
84. One of the most pressing concerns associated with the implementation of road congestion pricing policies can be resolved by:
A. | only charging tolls to those users who earn above a certain income |
B. | allowing free access to bicyclists and those who use fuel-efficient cars |
C. | employing barcode and debit card technologies to charge users |
D. | only charging tolls to visitors |
DIF: Moderate TOP: Congested roads
85. A policy that allows landowners to raise and kill elephants on their own properties is trying to:
A. | reduce the elephant population from becoming too large |
B. | regulate the elephant hunting market so that only the best quality tusks are sold to consumers |
C. | make sure the common resource that is elephants continues to grow |
D. | convert elephants to a private good so that wild populations do not become extinct |
DIF: Moderate TOP: Conclusion: The importance of property rights
86. Which of the following statements best describes the cause of ‘overrun and over-trampled’ national parks?
A. | park administrators do not use the best science available to manage park resources |
B. | national parks are treated as free goods by their visitors |
C. | national parks have never increased park visitation fees |
D. | the price of entrance to national parks has kept pace with other forms of recreation |
DIF: Moderate TOP: The Tragedy of the Commons
SHORT ANSWER
1. Why does society tend to produce too little basic research? What can the government do about it?
DIF: Easy TOP: Basic research
2. Some advocates of anti-poverty programs claim that fighting poverty is a public good. Explain what these advocates mean by classifying charity as a public good. What does this have to do with the need for government intervention?
DIF: Moderate TOP: Fighting poverty
3. What are two of the major difficulties of cost–benefit analysis?
DIF: Moderate TOP: The difficult job of cost–benefit analysis
4. Sheep-grazing on a common land and wireless internet share a common problem. Explain what this is and what are its causes.
DIF: Moderate TOP: The free-rider problem
5. Explain the fundamental reason that common resources have a tendency to be exploited in private markets.
DIF: Easy TOP: The Tragedy of the Commons
6. What combination of policies has the Singapore Government used to reduce road congestion and pollution? Why wouldn’t this reduction in road congestion occur without government intervention?
DIF: Moderate TOP: Congested roads
7. Jack criticises the idea of road tolls to fix congestion problems because he says they would allow the rich to drive more than the poor. You counter-argue by saying that road tolls could potentially address these equity issues and offer even an egalitarian solution. You propose to Jack that each automobile owner be given a specified debit card balance every year and that those who are willing to drive less can sell their unused balance to those who want to drive more. Jack likes your proposal, especially because of the manner in which your plan redistributes income. What groups of people might benefit from this implicit redistribution of income?
DIF: Difficult TOP: Fish, whales and other wildlife
8. In Australia, crocodiles are farmed for their leather and meat. Australian crocodile numbers have been increasing. In India, native crocodile species are protected and can’t be harvested but populations have been falling. Explain why harvest in Australia has led to more crocodiles and contrast with India.
DIF: Difficult TOP: Conclusion: The importance of property rights
9. Why do governments tend to run programs that help the poor?
DIF: Moderate TOP: Fighting poverty
10. A consortium of government, local councils, farmers and environmentalists has been created to try and manage the cattle effluent in rural streams. Identify a solution that may manage the resource better and explain how it may improve the water resources and protect them in the future.
DIF: Difficult TOP: Conclusion: The importance of property rights