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Exam 11: Public Goods and Common Resources.

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Question 1

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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

A) every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is the most efficient.
B) it would be more efficient if the electric company raised its rates for electricity at peak times.
C) it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times.
D) it would be more efficient to force everyone to cut their usage of electricity by the same amount.

E) C) and D)
F) B) and D)

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Question 2

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One possible solution to the problem of protecting a common resource is to convert that resource to a private good.

A) True
B) False

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Question 3

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A lighthouse is typically considered to be a public good because

Some goods,such as lighthouses,can switch between being public goods and being private goods depending on the circumstances.

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 $300.How many trees should be planted to maximize the total surplus of the four homeowners?

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

Which of the following goods is rival and excludable?

Each of the following would be considered a common resource except

Excessive fishing occurs because

Market failure associated with the free-rider problem is a result of

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

Free goods are usually efficiently allocated without government intervention.

Why do elephants face the threat of extinction while cows do not?

Table 11-2 Consider a small town with only three families, the Johnson family, the Marshall family, and the Walker 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 $450 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?"

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

Many species of animals are common resources,and many must be protected by law to keep them from extinction.Why is the cow not one of these endangered species even though there is such a high demand for beef?

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

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.

Which of the following is an example of general knowledge,as opposed to specific knowledge that can be patented?

Place each of the following in the correct location in the table. a. Congested toll roads b. Knowledge c. Fish in the ocean d. National defense e. Congested nontoll roads f. Cable TV g. The environment h. Fire protection i. Ice-cream cones j. Uncongested toll roads k. Clothing l. Uncongested nontoll roads