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Exam 11: Public Goods and Common Resources

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Question 21

Multiple Choice

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When property rights are not well established,

A) private goods become public goods.
B) markets fail to allocate resources efficiently.
C) the distribution of private goods is unfair.
D) government resources are used inefficiently.

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

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Question 22

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

A) These goods have a zero opportunity cost.
B) These goods are not scarce.
C) People do not have to pay an explicit fee to enjoy these goods.
D) The invisible hand is at work to ensure these goods are provided in the market

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

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Question 23

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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 pair of jeans is rival but non-excludable.

What particular characteristic do private goods and common resources have in common?

Table 11-1 Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. ​ ​ -Refer to Table 11-1. Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield?

In almost all cases of common resources, the same problem arises as in the Tragedy of the __________.

Table 11-2 Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident's willingness to pay for each hour of cleaning. ​ $\begin{array} { l l l l l } \hline \text { Hours } & \text { John } & \text { James } & \text { Mary } & \text { Lydia } \\\hline 1 & \$ 30 & \$ 50 & \$ 40 & \$ 10 \\2 & 25 & 40 & 37 & 9 \\3 & 20 & 30 & 34 & 8 \\4 & 15 & 20 & 30 & 7 \\5 & 9 & 10 & 25 & 6 \\6 & 3 & 0 & 15 & 5 \\7 & 0 & 0 & 5 & 4 \\\hline\end{array}$ ​ -Refer to Table 11-2. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Lydia's surplus if 6 hours of cleaning is done. ​

Which of the following is not a typical solution to the "Tragedy of the Commons?"

Even economists who advocate small government agree that national defense is a good that the government should provide.

Table 11-2 Consider the city of Widgetapolis with only four residents, John, James, Mary, and Lydia. The four residents are trying to determine how many hours to spend in cleaning up the public lake. The table below shows each resident's willingness to pay for each hour of cleaning. ​ $\begin{array} { l l l l l } \hline \text { Hours } & \text { John } & \text { James } & \text { Mary } & \text { Lydia } \\\hline 1 & \$ 30 & \$ 50 & \$ 40 & \$ 10 \\2 & 25 & 40 & 37 & 9 \\3 & 20 & 30 & 34 & 8 \\4 & 15 & 20 & 30 & 7 \\5 & 9 & 10 & 25 & 6 \\6 & 3 & 0 & 15 & 5 \\7 & 0 & 0 & 5 & 4 \\\hline\end{array}$ ​ -Refer to Table 11-2. Suppose the cost to clean the lake is $32 per hour and that the residents have agreed to split the cost of cleaning the lake equally. It would maximize Mary's surplus if 3 hours of cleaning is done. ​

A television broadcast is an example of a good that is

The parable called the Tragedy of the Commons applies to goods and services such as

Governments can improve market outcomes for

Some goods can be classified as either public goods or private goods depending on the circumstances.

Knowledge that is patented is a

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.

Luis, Mina, and Daniel all would like a play area while waiting at their children's bus stop. The neighborhood association is considering installing playground equipment at the bus stop. Luis values the equipment at $150, Mina at $100, and Daniel at $100. The equipment and labor for installation cost $300. If Luis, Mina, and Daniel are the only residents who value the equipment, what should the neighborhood association do?

Markets fail to allocate resources efficiently when

Because public goods are