ECO 450 WK 4 Quiz 3 Ch 4 & 5

ECO 450 WK 4 Quiz 3 Ch. 4 & 5

True/False Questions

1. Bread is an example of a good that is nonrival in consumption.

2. A pure public good is one for which it is easy to exclude consumers from benefits if they refuse to pay.

3. The marginal social cost of producing another unit of a pure public good will always be positive.

4. To obtain a demand curve for a pure public good, the marginal benefit of each consumer must be summed for each possible quantity produced per time period.

5. If the efficient amount of a pure public good is produced, each person consumes it up to the point at which his or her marginal benefit equals the marginal social cost of the good.

6. In a Lindahl equilibrium, each consumer of a pure public good consumes the same quantity and pays a tax share per unit of the good equal to his or her marginal benefit.

7. If the marginal social cost of a pure public good exceeds its marginal social benefit, additional units of the good can still be financed by voluntary contributions.

8. The free-rider problem is less acute in small groups than it is in large groups.

9. A congestible public good is one for which the marginal cost of allowing an additional consumer to enjoy the benefits of a given quantity is always zero.

10. Television programming is a good example of a price-excludable public good.

11. It is possible to price a pure public good and sell it by the unit.

12. The demand curve for a pure public good is obtained by adding the quantities demanded by each individual consumer at each possible price.

13. A Lindahl equilibrium usually has each participant paying the same tax share per unit of a public good even though their marginal benefit of that unit varies.

14. Internet service is an example of a price-excludable public good.

15. Clubs are a means of providing congestible public goods through markets.

16. A common way to fund a public good is through a government that raises funds through taxation.

17. Private education is an example of a price-excludable public good.

18. A congestible good has no limits in how much it can be consumed.

Multiple Choice Questions

1. A pure public good is:

a. one that can easily be sold by the unit.

b. one that is nonrival in consumption.

c. one whose benefits are not subject to exclusion.

d. both (b) and (c)

2. The marginal cost of providing a certain quantity of a pure public good to an additional consumer after it is provided to any one consumer is:

a. zero.

b. positive and increasing.

c. positive and decreasing.

d. positive and constant.

3. The nonrival property of pure public goods implies that the:

a. benefits enjoyed by existing consumers decline as more consumers enjoy a given quantity of the good.

b. benefits enjoyed by existing consumers are unaffected as more consumers enjoy a given quantity of the good.

c. good cannot be priced.

d. marginal cost of producing the good is zero.

4. The demand curve for a pure public good is:

a. a horizontal line.

b. obtained by adding the quantities individual consumers would purchase at each possible price.

c. obtained by adding the marginal benefit obtained by each consumer at each possible quantity.

d. the marginal cost curve for the pure public good.

5. The efficient output of a pure public good is achieved at the point at which:

a. the marginal benefit obtained by each consumer equals the marginal social cost of producing the good.

b. the sum of the marginal benefits of all consumers equals the marginal social cost of producing the good.

c. the marginal benefit of each consumer equals zero.

d. the marginal social cost of producing the good is zero.

e. both (c) and (d)

6. The monthly rental rate for a satellite dish antenna is $200. The maximum marginal benefit that any resident of a condominium community will obtain per month from the antenna is $50. There are 100 residents in the community, none of whom values the antenna at less than $25 per month. Assuming that the antenna is a pure public good for residents of the community,

a. each resident of the community will rent his own antenna.

b. it is inefficient for the community to rent an antenna.

c. it is efficient for the members of the community to rent an antenna for their common use.

d. it is efficient for each resident to rent his own antenna.

7. In a Lindahl equilibrium,

a. each consumer purchases a pure public good up to the point at which his or her marginal benefit equals the marginal social cost of the good.

b. each person pays a tax per unit of the pure public good equal to his or her marginal benefit.

c. the sum of the marginal benefits of all consumers equals the marginal social cost of the good.

d. both (a) and (c)

e. both (b) and (c)

8. The free-rider problem:

a. becomes more serious as the number of persons involved in voluntarily financing a pure public good decreases.

b. becomes more serious as the number of persons involved in voluntarily financing a pure public good increases.

c. is independent of the number of persons involved in a scheme to voluntarily finance a pure public good.

d. does not prevent voluntary cooperation from efficiently providing pure public goods.

9. The marginal cost of making a given quantity of a congestible public good available to more consumers is:

a. always zero.

b. positive and increasing.

c. positive and decreasing.

d. zero at first but eventually becomes positive and increasing.

10. Cable TV programming is an example of a:

a. congestible public good.

b. price-excludable public good.

c. pure public good.

d. pure private good.

11. A major distinction between pure public goods and pure private goods is that:

a. pure private goods can easily be priced and sold in markets.

b. pure public goods can easily be divided into units.

c. pure public goods can only be collectively consumed.

d. both (a) and (c)

12. The principle of nonexclusion for pure public goods means that the benefits of the good:

a. are shared.

b. can be priced.

c. cannot be withheld from consumers even if they refuse to pay.

d. are not reduced to any one consumer when a given quantity is consumed by another.

13. Which of the following is true in a Lindahl equilibrium for cooperative supply of a pure public good?

a. The sum of the tax shares per unit paid by each consumer is equal to the marginal social cost of the public good.

b. The sum of the tax shares per unit paid by each consumer is equal to the marginal social benefit of the good.

c. The sum of the tax shares per unit paid by each consumer is maximized.

d. both (a) and (b)

14. Which of the following is a good example of a congestible public good?

a. TV programming

b. a road

c. a loaf of bread

d. homeland security

15. Education is:

a. a pure public good.

b. a pure private good.

c. a good that has characteristics of both public goods and private goods.

d. not subject to the exclusion principle.

16. An example of an undesirable public good (or public “bad”) is:

a. government.

b. private trash hauling.

c. poor air quality.

d. private property.

17. Public transportation is:

a. a congestible good.

b. a pure private good.

c. a good without limits to the number of consumers who desire to use it.

d. not subject to the exclusion principle.

18. A baseball field is:

a. a pure public good.

b. a pure private good.

c. a good that has characteristics of both public goods and private goods.

d. not subject to the exclusion principle.

19. A means of creating a price-excludable public good is:

a. allowing food and beverages when entering.

b. requiring costly tickets.

c. to fund through taxation.

d. requiring identification.

20. A free concert in a public arena is:

a. a non-congestible public good.

b. a good that can be consumed by all.

c. a private good.

d. subject to consumption limits.

Course Home Work

Tuesday 30 June 2015

ECO 450 WK 4 Quiz 3 Ch 4 & 5

ECO 450 WK 4 Quiz 3 Ch 4 & 5

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