Ch11-True False & Short Answer
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Chapter 11 Public Goods and Common Resources TRUE/FALSE 1. When goods are available free of charge, the market forces that normally allocate resources in our economy are absent. ANS: T DIF: 2 REF: 11-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market failure MSC: Interpretive 2. Free goods are usually efficiently allocated without government intervention. ANS: F DIF: 2 REF: 11-0 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Market failure MSC: Interpretive 3. Most goods in our economy are allocated in markets, where buyers pay for what they receive and sellers are paid for what they provide. ANS: T DIF: 1 REF: 11-0 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Private goods MSC: Applicative 4. Government intervention cannot improve the allocation of resources for goods that do not have prices attached to them. ANS: F DIF: 2 REF: 11-0 NAT: Analytic LOC: The role of government TOP: Public goods MSC: Interpretive 5. A good that is excludable but not rival is known as a natural monopoly. ANS: T DIF: 1 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Natural monopolies MSC: Definitional 6. National Public Radio would be considered a natural monopoly. ANS: F DIF: 2 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Natural monopolies MSC: Interpretive 7. Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the show. ANS: F DIF: 1 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Excludability MSC: Applicative 8. A pair of jeans is rival but non-excludable. ANS: F DIF: 1 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Excludability | Rivalry in consumption MSC: Applicative 9. A good that is rival in consumption is one that someone can be prevented from using if she did not pay for it. ANS: F DIF: 1 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Excludability | Rivalry in consumption MSC: Definitional 10. Some goods can be classified as either public goods or private goods depending on the circumstances. ANS: T DIF: 2 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Public goods | Private goods MSC: Interpretive 732 Chapter 11/Public Goods and Common Resources 733 11. Roads can be considered either public goods or common resources, depending on how congested they are. ANS: T DIF: 1 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Public goods | Common resources MSC: Applicative 12. When one person enjoys the benefit of a tornado siren, she reduces the benefit to others. ANS: F DIF: 1 REF: 11-1 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Rivalry in consumption MSC: Applicative 13. Some goods, such as lighthouses, can switch between being public goods and being private goods depending on the circumstances. ANS: T DIF: 2 REF: 11-2 NAT: Analytic LOC: Understanding and applying economic models TOP: Public goods | private goods MSC: Interpretive 14. A free-rider is someone who receives the benefit of a good but avoids paying for it. ANS: T DIF: 1 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Free riders MSC: Definitional 15. A free rider is a person who pays for a good but does not receive the benefit of it. ANS: F DIF: 1 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Free riders MSC: Definitional 16. One benefit to the patent system is that it encourages the production of technical knowledge. ANS: T DIF: 1 REF: 11-2 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Excludability MSC: Applicative 17. Government agencies, such as the National Science Foundation, subsidize basic research because in the absence of a subsidy too little research would be conducted. ANS: T DIF: 1 REF: 11-2 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Public goods MSC: Applicative 18. 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. ANS: F DIF: 2 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Public goods MSC: Interpretive 19. In some cases the government can make everyone better off by raising taxes to pay for certain goods that the market fails to provide. ANS: T DIF: 2 REF: 11-2 NAT: Analytic LOC: The role of government TOP: Public goods MSC: Interpretive 20. Even economists who advocate small government agree that national defense is a good that the government should provide. ANS: T DIF: 1 REF: 11-2 NAT: Analytic LOC: The role of government TOP: Public goods MSC: Applicative 21. Advocates of antipoverty programs claim that fighting poverty is a public good. ANS: T DIF: 1 REF: 11-2 NAT: Analytic LOC: Understanding and applying economic models TOP: Public goods MSC: Applicative 734 Chapter 11/Public Goods and Common Resources 22. Private markets usually provide lighthouses because ship captains have the incentive to navigate using the lighthouse and therefore will pay for the service. ANS: F DIF: 2 REF: 11-2 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Public goods MSC: Interpretive 23. The free-rider problem arises when the number of beneficiaries is large and exclusion of any of them is impossible. ANS: T DIF: 1 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Free riders MSC: Applicative 24. A study that compares the costs and benefits to society of providing a public good is called externality analysis. ANS: F DIF: 1 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Cost-benefit analysis MSC: Definitional 25. Economists argue that we can calculate the value of a human life by observing voluntary risks that people take every day. ANS: T DIF: 2 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Cost-benefit analysis MSC: Applicative 26. If we can conclude that human life has a finite value, cost-benefit analysis can lead to solutions in which human life is worth less than the cost of a potential project. ANS: T DIF: 2 REF: 11-2 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Cost-benefit analysis MSC: Interpretive 27. Aristotle writes, “What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others.” In this statement, Aristotle is referring to the free-rider problem that occurs when a person receives the benefit of a good without paying for it. ANS: F DIF: 2 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Tragedy of the Commons MSC: Interpretive 28. One solution to the “Tragedy of the Commons” is to turn the common resource into a private good. ANS: T DIF: 1 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Tragedy of the Commons MSC: Interpretive 29. An example of the “Tragedy of the Commons” is litter in the picnic area of a local park. ANS: T DIF: 2 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Tragedy of the Commons MSC: Applicative 30. London charges drivers driving in “congestion zones” a tax in order to reduce traffic congestion. ANS: T DIF: 1 REF: 11-3 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Common resources MSC: Applicative 31. Governments that chose to make endangered elephants private goods have met with more success protecting elephants than governments that chose to make killing elephants illegal. ANS: T DIF: 2 REF: 11-3 NAT: Analytic LOC: Markets, market failure, and externalities TOP: Common resources MSC: Interpretive Chapter 11/Public Goods and Common Resources 735 32. One person's use of common resources does not reduce the enjoyment other people receive from the resource. ANS: F DIF: 2 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Common resources MSC: Applicative 33. If Toby and Pete are the only two fishermen in town and neither is bothered by the other's fishing, the lake they fish in is not a common resource. ANS: T DIF: 2 REF: 11-3 NAT: Analytic LOC: Understanding and applying economic models TOP: Common resources MSC: Interpretive 34. One possible solution to the problem of protecting a common resource is to convert that resource to a private good. ANS: T DIF: 2 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Common resources MSC: Interpretive 35. Tolls are not effective in altering people's incentives to drive during rush hour. ANS: F DIF: 2 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Common resources MSC: Applicative 36. The profit motive that stems from private ownership means that elephant populations are best protected as common resources. ANS: F DIF: 2 REF: 11-3 NAT: Analytic LOC: The Study of economics, and definitions in economics TOP: Common resources MSC: Interpretive 37. In the Tragedy of the Commons, joint action among the individual citizens would be necessary to solve their common resource problem unless the government intervenes.