Q21. A public good is a goodthat

A.

is consumed by a single person or household.

B.

cannot be used by private citizens.

C.

is available for everyone toconsume, regardless of who pays.

D.

is provided by the government.

Q22. A private good is a goodthat:

A.

is available for everyone toconsume, regardless of who pays.

B.

is consumed by a single person or household.

C.

cannot result in external benefits or costs to those whodon't consume.

D.

cannot be used by private citizens.

Q23. When economists say that a good is nonrival inconsumption, they meanthat:

A.

more than one person can enjoy the good at the same time.

B.

everyone wants the good.

C.

the good is widely available.

D.

no one wants the good.

Q24. When economists say that a good isnonexcludable, they meanthat:

A.

there is no practical way to stop a person who does not pay from enjoying the good or service.

B.

everybody wants it.

C.

more than one person can consume the good.

D.

everybody is willing to pay for it.

Q25. Suppose that a state installs a toll booth on a highway and requires drivers to pay$1.00 before entering the highway. Installation of the toll booth changes

A.

a nonexcludable good into an excludable good.

B.

a nonrival good into a rival good.

C.

public good into a private good.

D.

a nonrival good into a nonexcludable good.

Q26. The freerider problem impliesthat:

A.

nobody wants the public good.

B.

each person will try to benefit from the public good without paying for it.

C.

each person will pay the full cost of the public good.

D.

everybody will pay a portion of the cost of the public good.

Q27. The freerider problem arises because

A.

onceprovided, a public good is available to all regardless of whether they paid for it.

B.

enforcement of tax laws is inadequate.

C.

people disagree with how the government spends it s money.

D.

poor people cannot afford to contribute to public goods.

Q28. When the government provides a public good by taxing citizens and using tax money to provide thegood:

A.

the result is efficient only if voters specifically agreed to the provision of that good.

B.

the result is inefficient because if it were efficient the good would have been provided in a free market.

C.

the result is inefficient because the government is an inefficient provider of goods and services.

D.

the result is efficient if the total benefit of the public good is greater than the cost of providing it.

Q29. In the voluntary contributions experiment described at the end of thechapter, the chump is the individualwho:

A.

contributes money to fund a public good equal to the benefitshe/she ultimately receives.

B.

free rides.

C.

is systematically exploited by others.

D.

contributes money to fund a public good much less than the benefitshe/she ultimately receives.

Q30. If the voluntary contributions experiment described at the end of the chapter is played multipletimes, we wouldexpect:

A.

the voluntary contributions will fall short of the amount required to provide the publicgood, but only by a small amount.

B.

the voluntary contributions will be zero or close to zero.

C.

the voluntary contributions will equal the amount required to provide the public good.

D.

the voluntary contributions will exceed the amount required to provide the public good.

Q31.During pledge week your local public television station asks viewers to contribute to the station. People who watch public television but do NOT contribute are

A.

causing adverse selection.

B.

freeriding.

C.

engaged in moral hazard.

D.

those who do not value public television.

Q32. Which of the following is likely to overcome the freerider problem?

A.

Appeal topeoples' sense of civic or moral responsibility.

B.

Offer people a private gift for contributing.

C.

Arrange for matching contributions.

D.

all of the above

Q33. Which of the following is least likely to overcome the freerider problem?

A.

Arrange for matching contributions.

B.

Appeal topeoples' sense of civic or moral responsibility.

C.

Maintain anonymity of contributions.

D.

Offer people a private gift for contributing.

Q34. An appeal topeoples' sense of civic or moral responsibility will________ the freerider problem and lead to a________ level of contribution to the public good.

A.

reduce; smaller

B.

increase; larger

C.

reduce; larger

D.

increase; smaller

Q35. A college educationgenerates:

A.

no benefits.

B.

only private benefits.

C.

only external benefits.

D.

both private and external benefits.

Q36. In which of the following situations should a firm increase its efforts to abatepollution?

A.

The marginal benefit of abatement is equal to its marginal cost.

B.

The marginal benefit of abatement is less than its marginal cost.

C.

The marginal benefit of abatement is greater than its marginal cost.

D.

none of the above

Q37. If the marginal benefit of reducing water pollution is constant at$10 perton, then it is efficient to reduce water pollution

A.

until the marginal cost of reducing water pollution equals$10 per ton.

B.

as long as the marginal cost of reducing water pollution is greater than$10 per ton.

C.

to zero.

D.

to whatever level the market determines.

Q38. If the marginal benefit from water pollution abatementincreases, then it is efficientto:

A.

reduce water pollutionfurther, but maybe not to zero.

B.

let the market determine water pollution

C.

allow more water pollution.

D.

reduce water pollution to zero.

Q39. The Coase bargaining solution is namedafter:

A.

Alexander Coase.

B.

John Coase.

C.

William G. Coase.

D.

Ronald Coase.

Q40. The Coase bargaining solution applies to a situation when there is a________ number of affectedparties, and the transactions costs of bargaining are relatively________.

A.

small; low

B.

large; high

C.

small; high

D.

large; low

Q41. Recall the Application"Reducing MethaneEmissions." Applying the marginal principle to methane reduction suggests that efforts at reduction should

A.

target the sources of methane that are cheapest toabate, orrecover, first.

B.

not be undertaken because livestock is one of the major sources ofmethane, and livestock is not an industrial source of pollution.

C.

target the most costly to recover sources of methane first.

D.

continue until methane is reduced to zero metric tons because the harm from methane is so high.

Q42. A pollutiontax:

A.

does not affect the quantity of a good demanded.

B.

is a method used to externalize internal costs.

C.

will not affect the price of the good being produced.

D.

is a method used to internalize external costs.

Q43. The social cost of production is

A.

the external cost of production that is greater than the benefit of production.

B.

the external cost generated by production.

C.

the private cost of production that is greater than the benefit of production.

D.

the private cost of production plus the external cost generated by production.

Q44. Because pollution taxes raise the costs of production forfirms, firms:

A.

will lower prices to consumers.

B.

will quit producing goods that generate pollution.

C.

must receive a higher price at every level of output.

D.

will increase the quantity produced at every price.

Q45. Recall the Application"The Effects of a CarbonTax." If the U.S. were to place a carbon tax on fossilfuels, we canexpect:

A.

an increase in demand for fuel oil.

B.

the price of fuel oil to decrease.

C.

the price of fuel oil to increase.

D.

no change in the price of fuel oil.

Q46. The demand for laboris:

A.

derived from the demand for the products it is used to produce.

B.

determined by the price of consumer products.

C.

determined by the demand for consumer products.

D.

all of the above

Q47. The demand for labor is called a"derived demand" because itis:

A.

affected by the price of consumer products workers produce.

B.

derived from the demand for the products it is used to produce.

C.

affected by the demand for consumer products workers produce.

D.

all of the above

Q48. The marginal product of labor isthe:

A.

change in revenue resulting from adding an additional unit of labor.

B.

change in labor necessary to produce an additional unit of output.

C.

change in output resulting from adding an additional unit of labor.

D.

cost of additional labor necessary to produce an additional unit of output.

Q49. Other things beingequal, as diminishing marginal returns begin tooccur, the marginal revenue product oflabor:

A.

remains unchanged as more workers are used.

B.

increases as more workers are used.

C.

decreases as more workers are used.

D.

none of the above