Multiple Choice Questions Chapter 16 Public Goods PDF

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Public goods are those for which 1) _______ A) external costs exist. B) individuals who do not pay cannot be excluded from consuming. C) individuals who do not pay can be excluded from consuming. D) no external costs exist. 2) When consumption of a good is nonrival and nonexcludable, the good is a A) public good. B) mixed good. C) private good. D) service.

2) _______

3) An example of a public good is A) a loaf of bread. C) a Ford truck.

3) _______ B) national defence services. D) a home computer.

4) Of those listed below, the best example of a pure public good is A) a radio broadcast. B) a book. C) a rock concert held in a small auditorium. D) a state lottery.

4) _______

5) Public goods are those for which consumption is A) rival. B) regulated. C) nonrival. D) unregulated.

5) _______

6) Nonrivalry is a feature of A) public goods. C) excludable goods.

6) _______ B) goods but not services. D) all nonexcludable goods.

7) Nonexcludability is a feature of A) goods but not services. C) public goods.

B) goods with an external cost. D) all nonrival goods.

7) _______

8) Pure private goods are those for which consumption is A) nonrival and excludable. B) rival and excludable. C) rival and nonexcludable. D) nonrival and nonexcludable.

8) _______

9) When consumption is rival and excludable, the product is a A) private good. B) service not a good. C) mixed good. D) public good.

9) _______

10) A good or service or a resource is nonexcludable if A) it is possible to prevent someone from enjoying the benefits of it. B) its use by one person decreases the quantity available for someone else.

10) ______

C) it is not possible to prevent someone from benefiting from it. D) its use by one person does not decrease the quantity available for someone else. 11) Education at a private university is NOT a public good because it is A) excludable. B) nonrival. C) both nonrival and nonexcludable. D) None of the above answers is correct.

11) ______

12) An uncrowded toll road is ________ because it is ________. A) not a pure public good; nonrival but excludable B) not a pure public good; both rival and excludable C) a pure public good; both nonrival and nonexcludable D) not a pure public good; nonexcludable but rival

12) ______

13) A good or service or a resource is excludable if A) it is possible to prevent someone from enjoying the benefits of it. B) its use by one person decreases the quantity available for someone else. C) it is not possible to prevent someone from enjoying the benefits of it. D) its use by one person does not decrease the quantity available for someone else.

13) ______

14) A good or service or a resource is nonrival if A) it is not possible to prevent someone from enjoying the benefits of it. B) it is possible to prevent someone from enjoying the benefits of it. C) its use by one person decreases the quantity available for someone else. D) its use by one person does not decrease the quantity available for someone else.

14) ______

15) If the consumption of Good A by one person does not decrease the consumption of Good A by another person, then the good is said to be A) nonexcludable. B) excludable. C) nonrival. D) rival.

15) ______

16) If I increase my consumption of a good and this has no impact on your ability to consume the same good, then this good is A) a free good. B) nonrival. C) both nonrival and nonexclusive. D) nonexclusive.

16) ______

17) Which of the following is the BEST example of a good that is nonrival but excludable? A) Cable television. B) National defence. C) A can of Pepsi. D) A fish in the ocean.

17) ______

18) A concert shown on a payperview cable station is an example of

18) ______

A) an excludable and rival good. B) an excludable and nonrival good. C) a nonexcludable and rival good. D) a nonexcludable and non rival good. 19) A good or service or a resource is rival if A) its use by one person does not decrease the quantity available for someone else. B) it is possible to prevent someone from enjoying the benefits of it. C) its use by one person decreases the quantity available for someone else. D) it is not possible to prevent someone from enjoying the benefits of it.

19) ______

20) Which of the following is the best example of a common resource? A) Cable television. B) National defence. C) A fish in the ocean. D) A can of Pepsi.

20) ______

21) A free rider is someone who A) produces a good and never gets paid for it. B) enjoys leisure more than work, at the margin. C) generates externalities in production. D) consumes a good without paying for it.

21) ______

22) Free riding A) is possible if the consumption of a good is characterized by excludability. B) is characteristic of private goods. C) occurs when consumers pay too much for services provided by government. D) is possible if the consumption of a good is characterized by non excludability.

22) ______

23) The free rider problem is the inability of private provision to achieve the efficient level of production of A) private goods. B) public goods. C) excludable goods. D) rival goods.

23) ______

24) The economy's marginal benefit curve for a public good is calculated by A) summing individuals' marginal benefit curves vertically. B) summing individuals' marginal benefit curves horizontally. C) averaging individuals' marginal benefit curves horizontally. D) averaging individuals' marginal benefit curves vertically.

24) ______

25) ______ 25) A diagram used to illustrate the efficient scale of a public good, a laser defence system, has the number of lasers on the horizontal axis and both total benefit (TB) and total cost (TC) on the vertical axis. The efficient quantity is marked on the horizontal axis directly below A) the highest point on the TB curve. B) the lowest point on the TC curve. C) the point where the TB curve is most above the TC curve. D) the intersection of the TB and TC curves.

26) Efficiency in the provision of a public good is achieved when its A) marginal benefit equals zero. B) average benefit equals its average cost. C) total benefit equals its total cost. D) marginal benefit equals its marginal cost.

26) ______

27) Public goods tend to be A) under provided by the private market because of the free rider problem. B) under provided by the private market because the marginal benefits of consumption are too low. C) over provided by the private market because of the problem of the commons. D) under provided by the private market because the marginal cost of production is too high.

27) ______

28) Private markets will not provide the efficient quantity of a public good because A) one person's consumption does not limit another person's consumption. B) it is hard to prevent a person from receiving the benefits of a public good even if the person did not pay for the good. C) of the freerider problem. D) All of the above answers are correct.

28) ______

29) Left alone, the quantity of a public good supplied by a private market is A) the quantity that maximizes total public benefit. B) less than the efficient quantity. C) more than the efficient quantity. D) equal to the efficient quantity.

29) ______

30) The free rider problem with a public good leads to A) underproduction if the good is provided by the government. B) overproduction if the good is provided by private markets. C) inefficiency if the good is provided by only private markets with no government action. D) None of the above answers is correct.

30) ______

31) A wellfunctioning government will produce more ________ than a can an unregulated private market. A) private goods B) excludable goods C) rival goods D) public goods

31) ______

32) The efficient quantity of a public good is the quantity that maximizes the difference between A) total benefit and total cost. B) average benefit and average cost. C) price and average cost. D) marginal benefit and marginal cost.

32) ______

Total benefit Total cost Levee height (millions of (millions of (meters) pounds) pounds) 1 100 20 2 155 40 3 200 70 4 235 110 5 260 160 33) Valley City is considering building a levee to protect its residents from flooding. The total costs and benefits are in the table above. The levee height that achieves the maximum net benefit is A) 2 meters. B) 5 meters. C) 4 meters. D) 3 meters.

33) ______

34) Valley City is considering building a levee to protect its residents from 34) ______ flooding. The total costs and benefits are in the table above. Assume that Valley City has 1 million residents. If Big Levee Inc. built a threemeter high levee around Valley City and charged £50 per person, it A) would earn an economic profit because the total cost of the levee is less than its total revenues. B) would incur an economic loss because the total cost of the levee is more than its total revenues. C) could earn a profit, break even, or incur a loss. D) would earn a normal profit, as most businesses do. 35) Based on the data in the table above, to pay for a levee of the efficient height, the residents must pay taxes of A) £200 million. B) £160 million. C) £110 million. D) £70 million.

Quantity 1 2 3 4 5 6

Pat's marginal benefit (pounds) 10.00 7.00 4.00 2.00 1.00 0.00

Al's marginal benefit (pounds) 4.00 3.00 2.00 1.00 0.00 0.00

Marginal cost (pounds) 0.50 1.00 1.50 3.00 5.50 9.00

36) If the good in the table above is a public good and Pat and Al are the only members of society, then the efficient quantity to produce is A) 3 units. B) 4 units. C) 6 units. D) 2 units.

Quantity (ships) 0 1 2

Total benefit 0 25 45

Total cost 0 5 15

35) ______

36) ______

3 4

65 70

30 50

37) The table above has the total benefit and total cost of producing navy ships, a public good. What is the efficient number of navy ships to be produced? A) 2 ships. B) 4 ships. C) 3 ships. D) 1 ship.

Marginal Quantity Marginal Marginal (lamps) benefit for Mike benefit for Joe benefit for Sam 0 1 4 8 5 2 3 6 4 3 2 4 3 4 1 2 2 5 0 0 0 38) Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room satisfy the characteristics of a pure public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. The marginal benefit for the second lamp to this group of roommates taken as a whole is A) 17. B) 9. C) 13. D) 10. 39) Mike, Joe, and Sam are roommates. They need lamps for their common living room. Lamps in their living room satisfy the characteristics of a pure public good for these roommates. The marginal benefit that each individual receives from varying numbers of lamps in the living room is given in the table above. If the marginal cost of a lamp is 9, what is the efficient number of lamps for the roommates to purchase? A) 1. B) 2. C) 4. D) 3.

Marginal Marginal benefit for Marginal cost benefit for Pooh Piglet Quantity (pounds per (pounds per (pounds per (hours per day) hour) hour) hour) 0 1 6 10 20 2 12 8 16 3 18 6 12 4 24 4 8 5 30 2 4 40) Suppose two individuals, Pooh and Piglet, desire protection (provided by Tigger) of their community, The Hundred Acre Wood, from heffalumps. Protection is a public good. The marginal cost of protection as well as Piglet's and Pooh's marginal benefits from protection are in the table above. What is the quantity of protection that achieves the maximum net benefit?

37) ______

38) ______

39) ______

40) ______

A) 2 hours per day. C) 4 hours per day.

B) 1 hour per day. D) 3 hours per day.

41) Suppose two individuals, Pooh and Piglet, desire protection (provided by Tigger) of their community, The Hundred Acre Wood, from heffalumps. Protection is a public good. The marginal cost of protection as well as Piglet's and Pooh's marginal benefits from protection are in the table above. How much is Pooh willing to pay for the efficient quantity of protection? A) £10.00 per hour. B) £4.00 per hour. C) £8.00 per hour. D) £6.00 per hour.

41) ______

42) Suppose two individuals, Pooh and Piglet, desire protection (provided by Tigger) of their community, The Hundred Acre Wood, from heffalumps. Protection is a public good. The marginal cost of protection as well as Piglet's and Pooh's marginal benefits from protection are in the table above. How much is Piglet willing to pay for the efficient quantity of protection? A) £12.00 per hour. B) £16.00 per hour. C) £8.00 per hour. D) £4.00 per hour.

42) ______

43) In the above figure, a proposal that has the largest net benefit is A) A. B) B. C) C. D) D.

43) ______

44) In the above figure, the proposal that is efficient is A) A. B) B. C) C.

44) ______ D) D.

45) In the above figure, the proposal that has no net benefit is A) A. B) B. C) C. D) D.

45) ______

46) In the above figure, a proposal that has a negative net benefit is A) A. B) B. C) C. D) D.

46) ______

47) In the above figure, a proposal that has zero net benefit is

47) ______

A) A.

B) B.

C) C.

D) D.

48) In the above figure, the proposal that has the best prospect of winning in 48) ______ an election with wellinformed voters is A) A. B) B. C) C. D) D. 49) In the above figure, if the good is a pure public good then the private market left alone is most likely to produce A) A. B) B. C) C. D) zero.

49) ______

50) In the above figure, if the good is a private good and the market is competitive with no externality, then the private market left alone will produce A) A. B) B. C) C. D) D.

50) ______

51) In the above figure, according to the social interest theory, the government will supply A) A. B) B. C) C. D) D.

51) ______

52) The above figure shows the marginal benefit and marginal cost curves for a public good. The quantity that has the largest total net benefit is A) A. B) B. C) C. D) zero units supplied.

52) ______

53) The above figure shows the marginal benefit and marginal cost curves for a public good. The efficient quantity is A) A. B) B. C) C. D) zero units supplied.

53) ______

54) The above figure shows the marginal benefit and marginal cost curves for a public good. The proposal that has the best prospect of winning in an election by wellinformed voters is A) A. B) B. C) C. D) zero units supplied.

54) ______

55) The tendency for competitors to make themselves identical to appeal to the maximum number of clients or voters is the A) public choice theory. B) rational ignorance. C) principle of minimum differentiation. D) social interest theory.

55) ______

56) The decision to not acquire information because the cost of doing so exceeds the expected benefit is called A) social interest theory. B) principle of minimum differentiation. C) rational ignorance. D) public choice theory.

56) ______

57) Rational ignorance says that a voter will not acquire information about an issue when the A) total benefit of the information is maximized. B) cost of acquiring information exceeds the benefit. C) marginal cost of acquiring information is zero. D) cost of acquiring information is less than the expected benefit from the information.

57) ______

58) Rational ignorance says that voters will A) vote on issues without having complete information. B) not vote on issues that they do not understand. C) gather information on issues that are not important. D) understand the technology before voting on defence.

58) ______

59) The decision not to acquire information because the cost of acquiring the 59) ______ information exceeds the expected benefit from the information is known as A) public choice theory. B) rational ignorance. C) inefficient provision. D) the principle of minimum differentiation. 60) Rational ignorance means A) the benefit from some information is not worth the cost of collecting it. B) ignorance is rationed. C) the information is unavailable. D) some people do not understand rationality.

60) ______

61) "I know that my vote alone will not influence whether or not any new foreign trade legislation is enacted, so I have decided not to spend the time learning about various legislative proposals." This quote reflects an example of A) government failure. B) the freerider problem. C) rational ignorance. D) voter inefficiency.

61) ______

62) Rational ignorance suggests that all voters will

62) ______

A) pursue information on all issues before voting. B) be ignorant about issues that are of no special interest to them. C) avoid voting if they have no information. D) be ignorant about all issues. 63) Civil servants' attempts to provide more than the efficient quantity of a public good could occur because A) failure of minimum differentiation. B) bureaucrats attempt to maximize net benefits. C) voters desire more of the good than do bureaucrats. D) of rational ignorance among voters.

63) ______

64) The above figure depicts the total costs and total benefits of a public good, employment of building inspectors. What is the efficient number of building inspectors to employ? A) 2000. B) 4000. C) 5000. D) 3000.

64) ______

65) The above figure depicts the total costs and total benefits of a public good, employment of building inspectors. What is the level of building inspectors that civil servants will want to employ? A) 2000 B) 3000 C) 5000 D) 4000

65) ______

66) The above figure depicts the total costs and total benefits of a public good, employment of building inspectors. The presence of a substantial degree of rational ignorance on the part of voters is likely to cause the employment of building inspectors to be A) 0. B) 5000. C) 3000. D) 2000.

66) ______

67) The social interest theory of government argues that government officials A) promote an efficient use of resources. B) maximize the likelihood of their re election. C) maximize the private values of their offices. D) maximize the amount of their campaign contributions.

67) ______

68) The idea that governments make choices that achieve efficiency in a political system in which voters are fully informed about the effects of policies and refuse to vote for outcomes that can be improved upon is called A) social interest theory. B) principle of minimum differentiation. C) rational ignorance. D) public choice theory.

68) ______

69) The possibility that government actions will fail to eliminate waste and fail to attain efficiency is emphasized by the A) externality theory of government. B) public choice theory of government. C) rivalry theory of government. D) social interest theory of government.

69) ______

70) The idea that governments make choices that are inefficient in a political 70) ____...