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Exam 11: Public Goods and Common Resources

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Question 91

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The national defense of the United States is not excludable because

A) my enjoyment of the national defense does not diminish your enjoyment of the national defense of the United States.
B) my enjoyment of the national defense does diminish your enjoyment of the national defense of the United States.
C) once the nation is defended, it is impossible to prevent any single person from enjoying the benefit of this defense.
D) once the nation is defended, it is possible to prevent any single person from enjoying the benefit of this defense.

E) B) and D)
F) None of the above

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Question 92

Multiple Choice

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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 fertilizer is 0.008. The cost of imposing a regulation that would ban the chemical is $32 million. If the value of a human life is equal to $10 million, how many people must the policy affect in order for the benefits to exceed the costs?

A) 256
B) 401
C) 3201
D) 4001

E) All of the above
F) B) and C)

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Question 93

Multiple Choice

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Table 11-3 This table describes the police protection demands for three equal sized groups of people in Safetyville. The second, third, and fourth columns show the number of person-hours of police protection per day that a group will demand for a given price (the first column) . -Refer to Table 11-3. What is the value of the 39th unit of police protection in Safetyville?

A free rider is a person who

Variable tolls on roads

Concerts in arenas are not excludable because it is virtually impossible to prevent someone from seeing the show.

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

If good x is available free of charge, then

A city street is

The Tragedy of the Commons

Table 11-5 A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip. -Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $1,000 per day and the 4 business owners have agreed to split the costs of the ferry trips equally. How many ferry trips would the owner of Store A prefer to have?

Private goods and club goods have in common that they are excludable, but are different in that private goods are rival while club goods are not rival in consumption.

Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons except

The pollution market failure is an example of the free rider problem.

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 table below 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 $9 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus) , what is the largest park size for which the majority of residents would vote "yes?"

Table 11-5 A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip. -Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $500. How many ferry trips should there be to maximize the total surplus of the four business owners?

A free rider problem arises when

If a road is congested, then use of that road by an additional person would lead to a

National Public Radio would be considered a club good.

Consider the following problems: overcrowded public highways, overfishing in the ocean, polluted air, and the near- extinction of the wild rhinoceros. What do these problems have in common?