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Exam 11: Public Goods and Common Resources

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Question 1

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The mayor of Newton is considering proposals to deal with an unsafe intersection. She could install a traffic light at a cost of $50,000 or she could install stop signs at a cost of $5,000. The traffic light is expected to reduce the risk of fatality by 0.45 percent and the stop signs are expected to reduce the risk of fatality by 0.054 percent. If the value of human life is estimated to be $10 million, what choice should the mayor make? Briefly explain.

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The mayor should install stop ...

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Question 2

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Because it is

A) excludable but not rival in consumption, a sweatshirt is a club good.
B) rival in consumption but not excludable, a sweatshirt is a club good.
C) both excludable and rival in consumption, a sweatshirt is a private good.
D) neither excludable nor rival in consumption, a sweatshirt is a public good.

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

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C

Question 3

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A pair of jeans is rival but non-excludable.

The greatest difficulty with cost-benefit analysis of a public project is determining

Figure 11-1 -Refer to Figure 11-1. The box labeled B represents what type of good?

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

For most goods in an economy, the primary signal that guides the decisions of buyers and sellers is

A traffic light would be considered a common resource.

Which of the following types of goods are rival in consumption?

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that

Figure 11-1 -Refer to Figure 11-1. A mathematical theorem is an example of general knowledge. In which of the boxes - A, B, C, or D - does a mathematical theorem belong?

Table 11-4 There are four homes along Belmont Circle, which surrounds a small plot of land. The land currently has no trees, and the 4 homeowners -- Adams, Benitez, Chen, and Davis -- are considering the idea of contributing to a pool of money that will be used to plant up to 4 trees. The table represents their willingness to pay, that is, the maximum amount that each homeowner is willing to contribute toward each tree. -Refer to Table 11-4. Suppose the cost to plant each tree is $90. How many trees should be planted to maximize the total surplus of the four homeowners?

All goods that are excludable are also rival in consumption, but not all goods that are rival in consumption are excludable.

If the government decides to build a new highway, the first step would be to conduct a study to determine the value of the project. The study is called a

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

It should not be surprising if the public sector fails to pay for the right amount or right kinds of basic research because

Table 11-2 Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family's willingness to pay for each streetlight. -Refer to Table 11-2. Suppose the cost to install each streetlight is $900 and the families have agreed to split the cost of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus) , what is the greatest number of streetlights for which the majority of families would vote "yes?"

A study that compares the costs and benefits to society of providing a public good is called externality analysis.

Which of the following is not a reason that the findings of cost-benefit analyses on public goods are only rough approximations?

Which of the following statements is true of the tax on gasoline?