Question 3
We saw in class that the same good can fall in different categories (public/private/club/common resource) depending on circumstances. An example of such a good would be watching a movie at the theater. If a lot of people want to watch it, the movie is a _________. If very few people want to watch it (to the point where a room could not even be filled), the movie is likely to be a _______.
A. a common resource; a public good
B. a public good; a common resource
C. a private good; a club good
D. a club good; a private good
3 points
Question 4
Which of the following statements about the free-rider problem is not true?
A. Individuals have an incentive to free-ride when the good is not excludable.
B. The kinds of goods for which the free rider problem arises are common resources and public good.
C. Markets for goods for which there is a free-rider problem are inefficient because not enough of the good is produced.
D. Goods for which the free-rider problem exists tend to be over provided relative to what would be optimal.
4 points
Question 5
To achieve the efficient provision of public goods, the
A. market should be allowed to operate without government intervention.
B. government must limit the provision of those goods.
C. government must tax producers of those goods.
D. government must either provide those goods or subsidize their production.
3 points
Question 6
Which of the following statements about public goods is not true?
A. Because people cannot be excluded from their consumption and thus have no incentive to pay for them, public goods are underprovided by the market.
B. Efficiency requires that the government provide or fund (subsidize) the provision of all public goods.
C. Efficiency requires that the government provide or fund only the public goods that create more benefits than costs to society.
D. In reality, it is hard to provide public goods efficiently.
3 points
Question 7
Public goods must be provided by the government as the market on its own will fail to provide them. However, even with government provision it is very hard to achieve efficiency. Why?
A. In reality, it is very hard (if not impossible) to accurately estimate the benefits of providing a public good.
B. A. In reality, there can be overruns in the cost of providing the public good.
C. Government decisions about which public goods to provide can be influenced by lobbying by interest groups.
D. All of the above are true.
4 points
Question 8
Which of the following is not a common resource?
A. congested roads
B. clean water
C. wild life, which hunters want to hunt and others want to view.
D. a fireworks display.
3 points
Question 9
Many species of animals must be protected by law to keep them from extinction. Why are cows not one of these endangered species even though there is such a high demand for beef?
A. Cows reproduce at a high rate and have adapted well to their environment.
B. Public policies protect cows from predators and diseases.
C. Cows are privately owned (private goods), whereas many endangered species are owned by no one (common resources).
D.There is a natural ecological balance between the birth rate of cows and human consumption.
3 points
Question 10
Which of the following statements about common resources is not true?
A. Due to the free-rider problem, common resources tend to be overused.
B. Because there is rivalry in the consumption of common resources, whenever one person uses a common resource it is imposing a negative externality on others who might also want to use it.
C. There are no private solutions to the management of common resources.
D. One of the solutions that ensures that common resources are properly managed is their privatization.
3 points
Question 11
In our analysis of the firm’s behavior and goals, when we talk about cost, we include _________, and when we talk about profit, we mean ________.
A. Explicit costs only; economic profit
B. Implicit costs only; economic profit
C. Implicit costs only; accounting profit
D. Explicit + implicit costs; economic profit
E. Explicit + implicit costs; accounting profit
3 points
Question 12
One of the differences between explicit and implicit costs is that
A. explicit costs must be greater than implicit costs.
B. explicit costs do not require a direct monetary outlay, whereas implicit costs do.
C. implicit costs do not require a direct monetary outlay, whereas explicit costs do.
D. implicit costs must be greater than explicit costs.
3 points
Question 13
Which of the following is FALSE:
A. If accounting profit is zero, then economic profit is negative
B. Economic profit takes cost the opportunity cost of time and capital into account
C. Economic Profit = Accounting Profit + Implicit Cost
D. Economic Profit = Accounting Profit – Implicit Cost
3 points
Question 14
Which of the following is an example of an implicit cost?
(i) the owner of a firm forgoing an opportunity to earn a large salary working in Wall Street
(ii) interest paid on the firm's debt
(iii) rent paid by the firm to lease office space
A. (ii) and (iii) only
B. (i) and (iii) only
C. (i) only
D. (iii) only
3 points
