Question 1

What are the two characteristics of public goods? Explain the significance of each for public provision as opposed to private provision. What is the free-rider problem as it relates to public goods? Is U.S. border patrol a public good or a private good? Why? How about satellite TV?

Give a full explanation.

Question 2

The Lojack car recovery system allows the police to track stolen cars. As a result, they not only recover 90% of Lojack-equipped cars that are stolen but also arrest many auto thieves and shut down many "chop shops" that take apart stolen vehicles to get at their used parts. Thus, Lojack provides both private benefits and positive externalities. Should the government consider subsidizing Lojack purchases?

Why or Why notjustify your answer.

Question 3

Why might citizens interested in maximizing economic efficiency be happy to invest their government with the right to coerce them in at least some situations?

Explain your reasoning.

Question 4

How does the problem of limited and bundled choice in the public sector relate to economic efficiency? Why are public bureaucracies possibly less efficient than firms?

Give a full explanation.