Question 1

Every few months, public radio announces a call for pledge support.During this time, it asks listeners to contribute to their local public radio station.Although they raise money during this time, it often falls short of the amount they wish to raise because:

Accepted Answer

Listeners may not feel the urgency to contribute because they can still listen to public radio even without contributing. Public radio is a public good, meaning it is non-excludable, meaning people can listen to it even if they don't contribute. This creates a free-rider problem where individuals can benefit from the public good without paying for it themselves. This is why the pledge drive often falls short of the desired amount.

Question 2

The North Woods is a public area that supports such a large moose population that the government sees no reason to regulate or limit the harvest of the moose.a) From an economic point of view, how is this situation going to lead to market failure?
b) You are appointed by the governor to regulate the harvest of moose from the North Woods.How could you use the three tools described in the text to maintain the efficient level of moose
harvest?

Accepted Answer

The answer of The North Woods is a public area...

Question 3

On hot summer days, beach parking lots are usually full by early morning even though one must pay in order to park there.Parking at such lots is:

Accepted Answer

Beach parking lots are rival in consumption because there are a limited number of parking spaces available. They are also excludable because one must pay in order to park there.

Question 4

The federal government provides national defense to the country.Why would it be unlikely for national defense to be provided by a private entrepreneur?

Accepted Answer

The answer of The federal government provides national defense to...

Question 5

A small public park in a large town with many other parks often has very few visitors because of its size.There is no fee to enter the park, but few people visit it, since other parks have more amenities.This park is:

Accepted Answer

The park is nonrival in consumption because one person's use does not diminish another's ability to use it, and it is nonexcludable because there is no fee to enter, so anyone can access it.

Question 6

When goods are rival in consumption and excludable, markets:

Accepted Answer

When goods are rival in consumption and excludable, markets will produce an efficient quantity of the good because consumers will be willing to pay the full price of the good, and producers will supply the good up to the point where the marginal cost equals the marginal benefit to society. This results in the efficient allocation of resources. When goods are rival in consumption and excludable, markets will produce an efficient quantity of the good. This is because the market mechanism will ensure that the marginal benefit that individuals derive from consuming the good is equal to the marginal cost of producing it. If the market produces less than the efficient quantity, there would be excess demand and higher prices which would signal producers to increase production. If the market produces more than the efficient quantity, there would be excess supply and lower prices which would signal producers to decrease production. Therefore, the market would produce the efficient quantity in this scenario.

Question 7

(Table: Marginal Benefit of Fire Hydrants) Bob and Nancy live in a new housing development and they would like to have fire hydrants installed.The table Marginal Benefit of Fire Hydrants shows Bob's and Nancy's individual marginal benefits of different quantities of fire hydrants.Suppose that the marginal cost of installing a hydrant is $10.a) What is the most that Nancy would be willing to pay to have one hydrant installed in the neighborhood?
b) If Nancy had to pay for fire hydrants on her own, how many hydrants would there be?
c) What is the optimal number of fire hydrants in the neighborhood?

Accepted Answer

The answer of (Table: Marginal Benefit of Fire Hydrants) Bob...

Question 8

(Table: Ultimate Fighting Marginal Benefit) Ultimate fighting, or mixed martial arts, is a rapidly growing spectator sport, and most bouts are available on a pay-per-view basis from local cable companies.The marginal cost of making the bout available to one additional consumer is zero.The table Ultimate Fighting Marginal Benefit refers to a viewing of the upcoming championship bout.a) If all five fans could view the fight without paying, how many would do so, and what would be the total consumer surplus to those consumers?
b) If the cable company charges $20 to view the championship bout, which consumers will pay to view it? What is the total consumer surplus for those fans? What is the total producer surplus for the cable company? How large is the deadweight loss from this pricing strategy?

Accepted Answer

The answer of (Table: Ultimate Fighting Marginal Benefit) Ultimate fighting,...

Question 9

A market produces too much of a good when the price of the good is:

Accepted Answer

When the price of a good is less than the marginal cost of providing it, it means that the supplier is not covering their costs and is losing money. In this scenario, if the market continues to produce more of the good, the suppliers will continue to incur losses. Therefore, producing too much of the good occurs when the price is less than the marginal cost.

Question 10

Colleges and universities solicit their alumni for donations that go toward the operation and advancement of the college.How does this present a potential free-rider problem? How can colleges and universities attempt to lessen the free-rider problem and increase alumni contributions?

Accepted Answer

The answer of Colleges and universities solicit their alumni for...

Question 11

The fish in the local river are considered a common resource, but the city's public sanitation work that keeps the river clean enough for people to fish in is considered a public good.How are they similar and what makes them different?

Accepted Answer

The answer of The fish in the local river are...

Question 12

More and more consumers are watching their favorite network television programs from their computers.Suppose that a network begins to charge a small fee to access and download an episode of a popular program.For a television network, the marginal cost of supplying the episode to one more customer is zero.a) What type of good is this Internet television episode download? Explain.b) Will the efficient quantity of television downloads be provided? Explain.

Accepted Answer

The answer of More and more consumers are watching their...

Question 13

Suppose you live in a community that relies on clean drinking water from a nearby lake.Lately you have noticed that the quality of the water has suffered as pollution washed into the lake.An editorial in the local newspaper suggests that all residents donate money to clean up the lake.Why would this suggestion be unlikely to succeed?

Accepted Answer

The answer of Suppose you live in a community that...

Question 14

Two students, Nikos and Camila, are working on a team project for a course.The project will receive one grade that will affect both students equally.Although they have done a great job, they have not kept track of their bibliography sources very well.They both have all the information, but neither has done the bibliography.Camila knows that Nikos will eventually do the bibliography, since Nikos does not like to turn in incomplete work.As a result:

Accepted Answer

Camila is relying on Nikos to do the bibliography and is not contributing to that part of the project, which is an example of free-riding.

Question 15

A good that is nonexcludable but rival in consumption is considered a:

Accepted Answer

A good that is nonexcludable but rival in consumption is called a common resource good. Examples of common resource goods include fisheries and forests. These goods are nonexcludable because it is difficult to prevent people from using them, but rival in consumption because one person's use of the good diminishes the amount available for others to use.

Question 16

The encouragement to voluntarily contribute to the provision of goods:

Accepted Answer

The encouragement to voluntarily contribute to the provision of goods may lead to the provision of public goods, but it may not always lead to the socially optimal provision. In the absence of government provision or regulation, voluntary contributions by individuals may not be sufficient to provide the socially desired level of the public good. However, such encouragement may still result in some provision of the public good. The provision of private goods, on the other hand, is not necessarily dependent on voluntary contributions. Private goods can be provided through markets where individuals pay for the goods they consume.

Question 17

Goods that are nonrival in consumption and nonexcludable are referred to as:

Accepted Answer

Goods that are non-rival in consumption and non-excludable are referred to as public goods. Public goods are goods that can be consumed by anyone without reducing the amount available for others to consume and individuals cannot be excluded from consuming the good. Examples of public goods include national defense, lighthouses, and public parks.

Question 18

Economic policy is an example of a good that is:

Accepted Answer

Economic policy is nonrival in consumption because one person's use of the policy does not reduce its availability to others, and it is nonexcludable because it is available to all citizens without exclusion.

Question 19

Many cities have placed toll booths on busy highways as a way to reduce congestion.In order to drive on this toll road, the driver must pay a price at the booth before proceeding.From an economist's point of view, why would a toll road be part of the solution for the problem of traffic congestion?

Accepted Answer

The answer of Many cities have placed toll booths on...

Question 20

An example of a good that is rival in consumption and nonexcludable is:

Accepted Answer

Public parks are rival in consumption because if one person is using a bench or occupying a picnic table, it limits the ability for others to use that same spot. However, they are non-excludable because it is difficult to prevent people from entering the park without a fee or ticket.

Quiz 17: Public Goods and Common Resources