Quiz 15: Public Goods and Public Choice

Public goods are: A)rival in consumption and their benefits are excludable. B)nonrival in consumption and their benefits are excludable. C)nonrival in consumption and their benefits are nonexcludable. D)rival in consumption and their benefits are nonexcludable.

Private goods are: A)rival in consumption and their benefits are excludable. B)nonrival in consumption and their benefits are excludable. C)nonrival in consumption and their benefits are nonexcludable. D)rival in consumption and their benefits are nonexcludable.

Which of the following would be an example of an external benefit? A)More people start to ride the bus and as a result air pollution is reduced. B)Firms are able to reduce their costs of production by using a more efficient technology. C)The government requires polluting firms to pay a special tax. D)A firm has just gotten permission to open a landfill on property that is adjacent to your home.

Which of the following contains most of the characteristics of a public good? A)education B)trash collection C)public transportation D)fireworks shows

Which of the following is NOT an example of a public good? A)a two tiered deck. B)an urban park C)a lighthouse. D)clean air

Which of the following situations contains most of the characteristics of a private good: A)free bread handed out by the government. B)an apartment in a public housing project. C)a hamburger. D)all of the above.

Goods that are nonrival in consumption and that have benefits that are nonexcludable are: A)private goods. B)neighbor effects. C)public goods. D)none of the above.

A good is nonrival in consumption when it: A)has either positive or negative external costs. B)is priced at its marginal cost. C)can be enjoyed by one person without that interfering with another's consumption. D)is nonexcludable.

Public goods: A)have nonexcludable benefits. B)are not subject to the free-rider problem. C)are rival goods. D)all of the above

When Chris buys pizza for his football party and he gets to decide who will have a slice of his pizza.This means his pizza is: A)nonrival and nonexcludable. B)a private good. C)a public good. D)rival,but nonexcludable.

Which of the following would be typically classified as a public good? A)postal delivery B)national defense C)toll roads D)college education

Which of the following would NOT be considered to be a public good? A)national defense B)radio broadcasts C)police protection D)a newspaper

Sirens located around a town to warn citizens of the approach of a tornado are an example of: A)an external cost. B)a private good. C)a common resource. D)a public good.

A harbor lighthouse that guides approaching ships is an example of: A)a public good. B)a private good. C)a monopoly. D)a good that is rival.

In the absence of government,an underallocation of resources generally exists for: A)goods with external costs. B)imported goods and services. C)public goods. D)all of the above

In the absence of government involvement,the problem that public goods impose on a market system is that: A)too little of the good is produced. B)too much of the good is produced. C)resources are wasted in the production of public goods. D)firms will earn large profits when producing these goods.

Which of the following is true? A)Public goods are generally paid for by voluntary contributions. B)Public goods are generally paid for by the government with tax revenues. C)Private goods will not be produced in the private market. D)none of the above

What distinguishes a public good from a private good? A)Public goods are subject to the free-rider problem. B)Private goods are never produced by the government. C)Public goods are excludable,but nonrival. D)Private goods will not be produced in private markets unless the government is involved.

Public goods and services are: A)generally paid for voluntarily by private individuals. B)always produced and sold in the private market. C)generally subject to quotas. D)generally paid for with tax revenues.

Which of the following is true concerning public goods? A)One person's enjoyment of a public good reduces another person's enjoyment from the same public good. B)People cannot be prevented from enjoying a public good. C)Public goods can be produced and patented by individuals. D)none of the above

The private market does NOT provide national defense because: A)the resources needed to provide national defense are not available in the private market. B)the fixed cost of providing national defense is too high. C)it is impossible to prevent anyone from enjoying the benefit of national defense. D)it is an excludable and rival good.

For public goods,an external benefit occurs because: A)the goods are overvalued by society. B)they provide total benefits that are greater than their costs,but smaller than the personal benefit of each individual. C)they are rival. D)none of the above

Due to the existence of external benefits associated with public goods: A)private markets will lead to an efficient allocation of resources. B)government intervention can possibly improve on private market outcomes. C)private markets will correct for the underproduction of the good. D)the free-rider problem is eliminated.

The problem with using voluntary contributions to support a public good is known as the ________ problem. A)user B)utility C)free-rider D)external cost

During a volunteer program to rebuild a local play ground,a group of volunteers from a top corporation participate in the program.Among the 20 people that show up to help rebuild the play ground,there are two individuals that just talk to each other and do not do any work as the rest of the people.At the end of the day,the entire group takes credit for the renovated project.How do you best describe this situation with the volunteer program to rebuild a local play ground? A)The incentive to help others is high. B)The free-ride of the two workers on the hard work of the others in the group who did work. C)The two individuals impose an external cost on other members of the group. D)none of the above

What defines a situation where a person consumes a good without having to pay for it? A)the rival problem B)the rival in consumption problem C)the free-rider problem D)the nonrival in consumption problem

The ________ problem of public goods occurs because people can enjoy the benefits of these goods even when they do not have to pay for them. A)moral hazard B)free-hand C)free-rider D)external cost

A free rider is a person who: A)does not maximize utility. B)enjoys something only if he pays for it. C)acts irrationally. D)enjoys something without paying for it.

Free riding is a problem with public goods but not with private goods because for the private good: A)the good is a rival good. B)the marginal cost of production is greater than zero. C)the good is an excludable good. D)the good is free.

Because people can enjoy the benefits of public goods whether they pay for them or not,they are usually unwilling to pay for them.This is known as the: A)drop-in-the-bucket problem. B)nonexcludable problem. C)nonrival problem. D)free-rider problem.

The free-rider problem arises: A)when people feel their contribution is so small relative to the total amount needed that it won't make a difference whether they contribute or not. B)when people realize they will still receive the benefits of a good whether they pay for it or not. C)whenever the government produces a good or service. D)whenever there is a surplus of the product in the market.

Suppose it is that time of the year for the National Public radio station to invite every listener to pledge and support the station.Donna is a daily listener and decides to wait for others to contribute and support the station.Meanwhile she continues to get the benefit of public broadcasting.This is an example of the: A)public good problem. B)free-rider problem. C)rival in consumption problem. D)drop-in-the-bucket problem.

Which of the following is NOT a way to overcome the free-rider problem? A)offer contributors private goods in return B)arrange for matching contributions C)have the government "volunteer" a wealthy person to pay for it by lottery D)appeal to the individual's sense of civic or moral responsibility

Suppose that during the pledge drive in October,the local public radio gives contributors a free subscription to the daily newsletters return for their monetary contribution.This gift will likely: A)lower the amount of voluntary contributions the station receives. B)help the stations overcome the free-rider problem. C)cost the stations more that they are worth. D)all of the above

Recall the application about a town building a clock tower and only putting clock faces on three sides of the tower.If a citizen of this town did not contribute toward the clock's construction but used it each day,he/she would be considered a: A)prompt person. B)good citizen. C)public-choice economist. D)free rider.

Recall the application about a town building a clock tower and only putting clock faces on three sides of the tower.How might a town eliminate the free-rider problem associated with a good,such as a clock tower? A)charge each person for their usage B)only allow the clock to face one direction C)decrease the size of the tower D)not provide the clock

Recall the application about global weather observation and what happens when it comes to international borders.What kind of problem does global weather observation face? A)Information gathered by one country is nonrival and therefore produces a free rider problem. B)No single organization gathers all the information to reveal the big weather picture. C)Some parts of the world received little to no monitoring. D)all of the above.

Every good or service that comes from the government is automatically considered a public good.

Public goods are land,labor,and capital resources provided by households in return for payments from the government.

The government is able to use its taxing power to provide a good that would otherwise not be provided.

The protection of the earth's ozone layer is an example of a public good.

Food stamps handed out to the needy by the government are an example of a public good.

When one person benefits from national defense,he or she reduces the benefit to others.

All goods that have social value will be profitable for firms in the private sector to produce.

A clock tower is a private good if individuals pay for the tower to be built.

The free-rider problem arises when the number of individuals who can benefit is large and exclusion of most of them is possible.

The free-rider problem is a problem intrinsic to public goods;the good or service is usually so costly that its provision generally does not depend on whether or not any single person pays.

Giving contributors a small gift is one way to overcome the free-rider problem.

What is a public good?

Give an example of an external benefit and explain why the outcome is inefficient.

List the two characteristics that define a public good.

Give an example of a public good.Explain what characteristics make this good a public good.

Explain the difference between private and public goods.

Explain the free-rider problem.

List three ways in which an organization can overcome the free-rider problem.

Suppose Patty has a house in a good neighborhood in Philadelphia,PA.She decides to have the exterior of her house painted and the windows replaced.After the work is completed her house has appreciated in value and has also helped the neighbors' houses to go up in value.This is an example of a: A)public good with external benefits. B)private good with external benefits. C)public good without external benefits. D)private good without external benefits.

Which of the following is TRUE about education? A)Education is a private good with external benefits like improved civic responsibilities. B)Education is a public good and improves workplace performance. C)Education is a public good that decreases government activities. D)Education is a private good that only benefits the student.

If there are external benefits associated with education,then: A)the social benefit exceeds the private benefit. B)the private benefit exceeds the social benefit. C)the social benefit equals the private benefit. D)None of the above are true.

Education generates external benefits.A free market with no government intervention will produce: A)an efficient level of education. B)more than the efficient level of education. C)less than the efficient level of education. D)zero units of education.

An individual would choose the number of news articles to read based on his/her: A)marginal social benefit and marginal private cost. B)total private benefits and the social benefit. C)marginal social benefit and the marginal social cost. D)marginal private benefit and marginal cost.

If Paul improves the landscape of the house by planting new grass,trimming the trees and also adding a fence,making the value of his house go up.Then the following will happen: A)Paul will be less happy because of the money he spent on his improvements. B)the neighbors will receive external benefits. C)the neighbors will be forced to improve their houses also. D)marginal social benefit will be less than marginal cost.

If the production of a good generates external benefits,the government could increase efficiency by: A)taxing the production of the good to reduce the amount produced. B)subsidizing the production of the good to increase the amount produced. C)regulating the production of the good to reduce the amount produced. D)requiring all producers of the product to be licensed to produce the product.

Activities that provide external benefits: A)should be taxed so that the recipients of the benefits pay for them;otherwise inefficiency will result. B)may be subsidized by the government to give decision makers an incentive to consider increasing their consumption. C)will not result in inefficiency if those benefits are not considered. D)all of the above

Recall the application about how a private good,LoJack,generates external benefits as well as private benefits.Who are the recipients of the external benefits generated by LoJack? A)the purchasers of the LoJack system B)the producers of the LoJack system C)the owners of cars that do not have the LoJack system D)the insurance companies that offer discounts to LoJack purchasers

Recall the application about how a private good,LoJack,generates external benefits as well as private benefits.Which of the following is NOT a benefit from the LoJack system? A)more stolen cars recovered B)more police being hired C)lower insurance costs D)fewer automobile thefts

The government can offer a subsidy that encourages people to seek more education.

If education results in external benefits,the government could subsidize education to lead the market to an inefficient level of output.

Education produces only public benefits while costing society billions of dollars.

The marginal social benefit of an activity equals its marginal private benefit plus its marginal external benefit.

Due to crime externalities,a more educated society tends to have a lower level of crime.

When there are external costs,the government can encourage people to take action that benefit other people.

List and explain some of the external benefits generated by education.

The purchase of fire extinguishers by apartment dwellers provides benefits to their neighbors.Explain why this situation leads to an inefficient outcome.

Public-choice economics is: A)the vote of every politician with respect to economics. B)the right of every citizen to know about the economic status of his/her country. C)the field that uses models of rational choice to study how governments operate. D)none of the above

In a two-party democratic system,individuals running for office typically: A)appeal to the "right-wing" voters in society. B)appeal to the "middle-of-the-road" voters in society. C)do what they think will weaken the other party long term. D)tell the voters the truth.

The median voter group is: A)a special interest group. B)a group of voters who express their opinions in television and radio advertisements. C)the large group of voters in the middle of the political spectrum. D)all of the above

The median-voter rule suggests that: A)politicians try to fool all of the voters all of the time. B)politicians decide how to vote on an issue by looking at how other politicians will vote. C)politicians often choose a position that reflects the preferences of the median voter. D)politicians try to ensure that the services provided by the government are distributed equally across voters.

Why might a politician start a costly spending program if its costs exceed its social benefits? A)The politician is trying to find ways to raise more money for the next election. B)The politician gains prestige and voters are not well informed of the benefits and costs. C)Voters do not care about the costs of programs,as long as their taxes do not go up. D)The costs cannot be measured therefore the politicians focus on the benefits which are explicit.

The model of government based on small groups of people manipulating government for their own gain is: A)conservative ideology. B)median-voter policy. C)special-interest politics. D)common resource strategy.

Self-interest theory of government is: A)a way for the government to impose its will. B)the power of the government to overrule its citizen without their consent. C)explains why voters might establish implicit boundaries of government spending and taxes. D)explains why voters might establish explicit limits of government spending and taxes.

According to the self-interest theory of government,limitations on taxes and spending accounts are: A)inessential precautions against politicians who focus on selfish behavior. B)necessary safeguards against politicians who benefit from larger budgets. C)the way all citizens can reap rewards from small interest groups. D)the only way to balance the government's budget.

When do we expect special-interest groups to form? A)when the benefits are spread out over many and the costs are concentrated on a few citizens B)when the costs of a project are spread out among all taxpayers while the benefits are concentrated among smaller segments of the population C)when there is a great possibility that a vast number of citizens will become free-riders D)when the choices made by the government match the preferences of the median voter

PAYING LANDOWNERS TO HOST WOLVES We can apply the concepts of public goods and free riding to the issue of preserving wildlife.There are some tradeoffs associated with preserving wolves and other wildlife in Yellowstone Park.To environmentalists,wolves are a part of the natural ecosystem.To ranchers,wolves are predators that eat livestock.In other words,there are costs as well as benefits associated with the preservation of wolves,just as there are costs and benefits associated with other public goods such as dams,fireworks,national defense,and space exploration. One response to the wolf-preservation problem comes from Defenders of Wildlife,an environmental group in Montana.The organization collects money from its members and uses the money to reward landowners who allow wolves to live on their properties.The host landowner receives a payment of $5,000 for each litter of wolf pups reared on the property.In addition,the organization compensates ranchers for livestock killed by wolves. As a result of these programs,ranchers in the Yellowstone area are more likely to support efforts to maintain the wolves as part of Yellowstone Park's ecosystem.The programs treat preservation as a public good,one that is supported by money contributed by people who benefit from preservation.The organization has collected contributions from thousands of people despite the free-rider problem.The success of Defenders of Wildlife illustrates one of the key principles of economics. SOURCE: Terry L.Anderson,"A Carrot to Save the Wolf," The Margin,Spring 1992,p.28. -Recall the application on "Paying Landowners to Host Wolves." Wolves in the west: A)by their existence provide some people with a benefit. B)impose private costs on owners of livestock. C)can be preserved with voluntary exchange. D)all of the above

PAYING LANDOWNERS TO HOST WOLVES We can apply the concepts of public goods and free riding to the issue of preserving wildlife.There are some tradeoffs associated with preserving wolves and other wildlife in Yellowstone Park.To environmentalists,wolves are a part of the natural ecosystem.To ranchers,wolves are predators that eat livestock.In other words,there are costs as well as benefits associated with the preservation of wolves,just as there are costs and benefits associated with other public goods such as dams,fireworks,national defense,and space exploration. One response to the wolf-preservation problem comes from Defenders of Wildlife,an environmental group in Montana.The organization collects money from its members and uses the money to reward landowners who allow wolves to live on their properties.The host landowner receives a payment of $5,000 for each litter of wolf pups reared on the property.In addition,the organization compensates ranchers for livestock killed by wolves. As a result of these programs,ranchers in the Yellowstone area are more likely to support efforts to maintain the wolves as part of Yellowstone Park's ecosystem.The programs treat preservation as a public good,one that is supported by money contributed by people who benefit from preservation.The organization has collected contributions from thousands of people despite the free-rider problem.The success of Defenders of Wildlife illustrates one of the key principles of economics. SOURCE: Terry L.Anderson,"A Carrot to Save the Wolf," The Margin,Spring 1992,p.28. -Recall the application on "Paying Landowners to Host Wolves." Landowners let wolves live on their property because: A)a private group pays them for each litter of wolf pups reared on it property. B)the government orders them too. C)wolves are good for livestock. D)all of the above

PAYING LANDOWNERS TO HOST WOLVES We can apply the concepts of public goods and free riding to the issue of preserving wildlife.There are some tradeoffs associated with preserving wolves and other wildlife in Yellowstone Park.To environmentalists,wolves are a part of the natural ecosystem.To ranchers,wolves are predators that eat livestock.In other words,there are costs as well as benefits associated with the preservation of wolves,just as there are costs and benefits associated with other public goods such as dams,fireworks,national defense,and space exploration. One response to the wolf-preservation problem comes from Defenders of Wildlife,an environmental group in Montana.The organization collects money from its members and uses the money to reward landowners who allow wolves to live on their properties.The host landowner receives a payment of $5,000 for each litter of wolf pups reared on the property.In addition,the organization compensates ranchers for livestock killed by wolves. As a result of these programs,ranchers in the Yellowstone area are more likely to support efforts to maintain the wolves as part of Yellowstone Park's ecosystem.The programs treat preservation as a public good,one that is supported by money contributed by people who benefit from preservation.The organization has collected contributions from thousands of people despite the free-rider problem.The success of Defenders of Wildlife illustrates one of the key principles of economics. SOURCE: Terry L.Anderson,"A Carrot to Save the Wolf," The Margin,Spring 1992,p.28. -Recall the application about the median voter in the NBA.who was benefited from the 1997 agreement that use salary caps and other provisions? A)the players who had salaries higher than the median players' salary B)the players who had salaries below and closest the median players' salary C)the voters who were part of the board and were playing the high salaries to all the players D)None was benefited from the agreement.

In a two-party democratic system,elected officials typically choose a view that is close to the median voter to ensure their reelection.

In a democracy,the median voter will tend to determine the quantities and types of public goods produced.

The median-voter theory suggests that different political parties will not adopt the same position as the median voter to distinguish from the competition.

A politician might pursue his own interest even though it may differ from the public interest.

Self-interest theory of government allows politicians to get re-elected and make a career of politics.

Recall the example about the dam and the farmers,the cause of building the dam is spread among a small special interest group (farmers)and the benefit is obtained by the taxpayers.

When a few people share the benefit from a project and a large number of people pay for the cost,the government is more likely to approve inefficient projects.

Special interest groups never use propaganda to express their views to government officials.

Give an example where individuals "vote with their feet" in choosing among bundles of public goods and tax rates.

List four different theories of how the government operates.

What is public choice economics?

What is the median-voter rule?