Question 1

Why is there a free-rider problem with public goods?

Accepted Answer

Once a producer has provided a public go...

Question 2

Deregulation of an industry will always lead to an improvement in economic efficiency.

Accepted Answer

A) True 
 B)False

Question 3

A demand curve for a public good is determined by

Accepted Answer

A)  summing vertically the individual demand curves for the public good.
B)  summing horizontally the individual demand curves for the public good.
C)  combining the amounts of the public good that the individual members of society demand at each price.
D)  multiplying the per-unit cost of the public good by the quantity made available.E) B) and C)
F) A) and B)

Question 4

Public goods are those for which there

Accepted Answer

A)  is no free-rider problem.
B)  are not any externalities.
C)  is nonrivalry and nonexcludability.
D)  is rivalry and excludability.E) All of the above
F) A) and D)

Question 5

According to the paradox of voting,

Accepted Answer

A)  public goods that cost more than the total benefits they confer may get produced under majority voting.
B)  trading of votes may either add to or subtract from economic efficiency.
C)  the median voter decides what public goods all voters should have.
D)  majority voting fails, under some circumstances, to make consistent choices that reflect the community's underlying preferences.E) A) and D)
F) B) and C)

Question 6

Suppose that Katie and Kelly each expect to receive $500 worth of marginal benefits from a proposed new recreation center, whereas Kerry expects to receive only $100 worth. If the proposed tax levied on each for the center would be $400, a majority vote will

Accepted Answer

A)  defeat this project and resources will be underallocated to it.
B)  pass this project and resources will be efficiently allocated.
C)  pass this project and resources will be underallocated to it.
D)  pass this project and resources will be overallocated to it.E) All of the above
F) A) and D)

Question 7

Toll-free roads sometimes get congested, such as during rush-hour traffic. During those times, we would say that these roads are

Accepted Answer

A)  excludable and rival.
B)  excludable and nonrival.
C)  nonexcludable and nonrival.
D)  nonexcludable and rival.E) A) and D)
F) C) and D)

Question 8

Suppose that in a series of paired-choice votes, a new park is preferred to a new recreation center and a new recreation center is preferred to street widening. Also suppose that street widening is preferred to a new park. This set of votes is an example of the

Accepted Answer

A)  principal-agent problem.
B)  benefits-received principle.
C)  median-voter model.
D)  paradox of voting.E) A) and D)
F) A) and C)

Question 9

Political corruption occurs in the following instances, except when

Accepted Answer

A)  government officials use their powers for personal gain.
B)  people pay a government official to do what she should be doing.
C)  people pay a bureaucrat to do something that he should not be doing.
D)  businesses pay property taxes and license fees.E) A) and C)
F) B) and C)

Question 10

A public good

Accepted Answer

A)  can be profitably produced by private firms.
B)  is characterized by rivalry and excludability.
C)  produces no positive or negative externalities.
D)  is available to all and cannot be denied to anyone.E) C) and D)
F) B) and C)

Question 11

Define earmarks.

Accepted Answer

Narrow, specially designated spending au...

Question 12

As voters "vote with their feet" and move to political districts where the median voter's preference is closer to their own, the median voter's preference will

Accepted Answer

A)  strengthen.
B)  weaken.
C)  shift.
D)  stagnate.E) A) and D)
F) B) and C)

Question 13

What are the two characteristics that differentiate private goods from public goods?

Accepted Answer

A)  rivalry and excludability
B)  negative externality and positive externality
C)  marginal cost and marginal benefit
D)  ownership and usageE) All of the above
F) C) and D)

Question 14

Answer the question on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size. All figures are in millions of dollars.  The marginal cost and marginal benefit of stadium B (relative to A) are

Accepted Answer

A)  $20 million and $50 million, respectively.
B)  $100 million and $200 million, respectively.
C)  $30 million and $50 million, respectively.
D)  $20 million and $60 million, respectively.E) B) and D)
F) B) and C)

Question 15

Esteban, Mariko, and Greta are the only three people in a community. Esteban is willing to pay $20 for the fifth unit of a public good; Mariko, $15; and Greta, $25. Government should produce the fifth unit of the public good if the marginal cost is less than or equal to

Accepted Answer

A)  $25.
B)  $15.
C)  $60.
D)  $20.E) B) and C)
F) A) and C)

Question 16

The optimal quantity of a public good is where the total benefits from it are equal to the total costs of producing it.

Accepted Answer

A) True 
 B)False

Question 17

When producers do not produce the efficient amount of a product because they are unable to charge consumers what they need to do so, then there exists a

Accepted Answer

A)  demand-side market failure.
B)  supply-side market failure.
C)  competitive market.
D)  monopolistic market.E) A) and B)
F) None of the above

Question 18

Describe how rent-seeking behavior works.

Accepted Answer

Rent-seeking is the appeal to government...

Question 19

Which of the following is the best example of rent-seeking behavior?

Accepted Answer

A)  Voters consider a ballot measure that would increase taxes to better fund schools.
B)  Students at a university lobby the administration to improve dorms and reduce class sizes without increasing tuition.
C)  Consumers try to get flying cars produced by telling automakers they are willing to pay for them.
D)  Senators vote for what their constituents want so they can get reelected.E) A) and D)
F) C) and D)

Question 20

Nonrivalry in the use or consumption of a good means that only one person is consuming the good without any rivals.

Accepted Answer

A) True 
 B)False

Exam 5: Public Goods, Public Choice, and Government Failure

According to the paradox of voting,

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Public goods are those for which there

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Deregulation of an industry will always lead to an improvement in economic efficiency.

Correct AnswerverifiedShow Answer

When producers do not produce the efficient amount of a product because they are unable to charge consumers what they need to do so, then there exists a

Correct AnswerverifiedShow Answer

Esteban, Mariko, and Greta are the only three people in a community. Esteban is willing to pay $20 for the fifth unit of a public good; Mariko, $15; and Greta, $25. Government should produce the fifth unit of the public good if the marginal cost is less than or equal to

Correct AnswerverifiedShow Answer

Answer the question on the basis of the following table that shows the total costs and total benefits facing a city of five different potential baseball stadiums of increasing size. All figures are in millions of dollars. The marginal cost and marginal benefit of stadium B (relative to A) are

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Nonrivalry in the use or consumption of a good means that only one person is consuming the good without any rivals.

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Suppose that in a series of paired-choice votes, a new park is preferred to a new recreation center and a new recreation center is preferred to street widening. Also suppose that street widening is preferred to a new park. This set of votes is an example of the

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The optimal quantity of a public good is where the total benefits from it are equal to the total costs of producing it.

Correct AnswerverifiedShow Answer

What are the two characteristics that differentiate private goods from public goods?

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Why is there a free-rider problem with public goods?

Correct AnswerverifiedOnce a producer has provided a public go...View AnswerShow Answer

Political corruption occurs in the following instances, except when

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Toll-free roads sometimes get congested, such as during rush-hour traffic. During those times, we would say that these roads are

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A public good

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Suppose that Katie and Kelly each expect to receive $500 worth of marginal benefits from a proposed new recreation center, whereas Kerry expects to receive only $100 worth. If the proposed tax levied on each for the center would be $400, a majority vote will

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Define earmarks.

Correct AnswerverifiedNarrow, specially designated spending au...View AnswerShow Answer

Which of the following is the best example of rent-seeking behavior?

Correct AnswerverifiedShow Answer

As voters "vote with their feet" and move to political districts where the median voter's preference is closer to their own, the median voter's preference will

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Describe how rent-seeking behavior works.

Correct AnswerverifiedRent-seeking is the appeal to government...View AnswerShow Answer

A demand curve for a public good is determined by

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Once a producer has provided a public go...
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Narrow, specially designated spending au...
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Rent-seeking is the appeal to government...
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