ProbSet18 20 - EC201: Spring 2010 Professor Steven Haider...

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EC201: Spring 2010 Professor Steven Haider Problem Set for Chaps 18 and 20 NOTE: An answer key follows each of the chapters. In the answer key, each question is assigned a “Topic”, which generally refers to a subtitle of the text. Thus, if you would like additional information about any of the questions, these topics will point you to where to look in the text. Version: 21-Apr-10
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Chapter 18 Page 1 1. For a good to be efficiently provided by a market economy, which of the following characteristics is essential? A) It is rival in consumption. B) It is excludable. C) It is a common resource. D) It is rival in consumption and it is excludable. 2. The best example of a public good is: A) legal services. B) national defense. C) a municipal library. D) cable television broadcasting. 3. The free-rider problem is a direct result of: A) the inability to exclude nonpayers. B) marginal-cost pricing. C) full-cost pricing. D) horizontally summed supply curves. 4. Bluefin tuna travel in schools throughout the world's oceans. Fishing boats from many nations harvest bluefin tuna as the schools migrate through their national waters. The schools of bluefin tuna are best described as: A) a private good. B) a public good. C) an artificially scarce resource. D) a common resource. 5. No individual is willing to pay for providing the efficient level of a public good since the: A) marginal cost of production is zero. B) good will be nonrival, and thus underconsumed. C) individual's marginal benefit is less than the marginal social benefit. D) marginal benefit of allowing one more individual to consume the good is zero.
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Page 2 Use the following to answer questions 6-7: 6. (Table: Street Cleanings) Peter and Wendy both benefit from having cleaner streets. The table shows the relationship between the number of street cleanings per month and the total benefit they get. What is the marginal social benefit for Peter and Wendy together when the number of street cleanings per month increases from 4 to 5? A) $30 B) $60 C) $6 D) $15 7. (Table: Street Cleanings) Peter and Wendy both benefit from having cleaner streets. The table shows the relationship between the number of street cleanings per month and the total benefit they get. Increasing the number of street cleanings per month from ________ would yield a marginal social benefit (for Peter and Wendy together) equal to $12. A) 1 to 2
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ProbSet18 20 - EC201: Spring 2010 Professor Steven Haider...

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