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Exam 11: Public Goods and Common Resources

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Question 51

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Table 11-2 Consider a small town with only three families, the Greene family, the Brown family, and the Black 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 $360 and the families have agreed to split the cost of installing the streetlights equally. To maximize their own surplus, how many streetlights would the Greene's like the town to install?

A) 0 streetlights
B) 1 streetlight
C) 2 streetlights
D) 3 streetlights

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Question 52

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Which of the following is not a common resource?

A) clean air
B) clean water
C) open grazing land
D) national defense

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Question 53

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Table 11-5 A small island off the coast of Cape Cod contains two restaurants and two retail stores. Tourists need to take a ferry boat to reach the island, but with a recent slowdown in the economy, tourists are less willing to pay for the boat ride to visit the island. The owners of the restaurants and stores on the island - Restaurants 1 and 2, and Stores A and B - think that if tourists could ride the ferry for free, they would be happy to visit the island, eat and shop. The business owners are considering contributing to a pool of money that will be used to pay for roundtrip ferry service each day. The table represents their willingness to pay, that is, the maximum amount that each business owner is willing to contribute, per day, to pay for each ferry trip. -Refer to Table 11-5. Suppose the cost to run the ferry for each roundtrip is $750 per day and the 4 business owners have agreed to split the costs of the ferry trips equally. Which of the following statements is correct?

Both public goods and common resources are

Figure 11-1 -Refer to Figure 11-1. A tornado siren in a small town is an example of the type of good represented by Box

Even economists who advocate small government agree that

The Tragedy of the Commons occurs because

In determining whether and how much of a public good to provide, cost-benefits analysts use the same type of price signals for public goods as are readily available for private goods.

What do clean air in New York City and elephants in Africa have in common?

The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is

As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because

Suppose that policymakers are doing cost-benefit analysis on a proposal to add traffic barriers to divide the flow of traffic in an effort to increase safety on a given highway. Which of the following statements is correct?

When good X is produced, some people benefit. A free-rider problem arises when

Table 11-2 Consider a small town with only three families, the Greene family, the Brown family, and the Black 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 $900. How many streetlights should the town install to maximize total surplus from the streetlights?

Scenario 11-3 Consider the following goods: • a fish fillet served at a restaurant • fish in the ocean • exotic fish in a huge aquarium in a privately-owned building -Refer to Scenario 11-3. Do any of these goods cause an externality? If so, which one(s)? Positive or negative? Briefly explain.

The provision of public goods gives rise to

Table 11-2 Consider a small town with only three families, the Greene family, the Brown family, and the Black 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 $360. How many streetlights should the town install to maximize total surplus from the streetlights?

Nontoll roads can be either public goods or common resources, depending upon the degree of congestion.

Because of the free-rider problem,

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. Which of the following statements about the aquifer is correct?