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Exam 11: Public Goods and Common Resources

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Question 61

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When the value of a human life is calculated according to the economic contribution a person makes to society as reflected in her income-earning potential) , the troubling implication is that

A) it is possible for a retired or disabled person to have no value to society.
B) economists are more valuable than entrepreneurs.
C) retired people who volunteer in their communities are more valuable than physicians.
D) all workers have equal value.

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

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Question 62

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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 $750. Then total surplus for the 4 business owners is

A) $330 if there is 1 ferry trip.
B) $370 if there are 2 ferry trips.
C) $150 if there are 3 ferry trips.
D) All of the above are correct.

E) All of the above
F) None of the above

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Question 63

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The Tragedy of the Commons describes

One economically efficient way to eliminate the Tragedy of the Commons is to

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 $24 per acre and that the residents have agreed to split the cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build?

The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case?

Scenario 11-3 Consider the following goods: • a fish fillet served at a restaurant • fish in the ocean • exotic fish in a huge aquarium in a privately-owned building -Refer to Scenario 11-3. Do any of these goods cause an externality? If so, which ones)? Positive or negative? Briefly explain.

The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is

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.

An absence of property rights often leads to market failure. When this is the case, how does society usually solve the problem?

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 $360. How many streetlights should the town install to maximize total surplus from the streetlights?

Producers have little incentive to produce a public good because

Figure 11-1 -Refer to Figure 11-1. In which box - A, B, C, or D - does cable TV belong?

Suppose that a small county is considering adding a guard rail to a dangerous curve by a river. The guard rail will cost $70,000. The average damage done to vehicles that slide off the road at the curve is $10,000. It is expected that the guard rail will prevent 5 vehicles from sliding off the road during its usable life. What should the county do?

Which of the following is an approach used by economists to calculate the value of a human life?

A congested side street in your neighborhood is

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

When a free-rider problem exists,

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

One benefit of the patent system is that it encourages the production of technical knowledge.