Principles Of Economics 6th Edition By N. Gregory Mankiw – Test Bank

Overview

Chapter 11
Public Goods and Common Resources

Multiple Choice

1. For private goods allocated in markets,
a. prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.
b. prices guide the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources.
c. the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.
d. the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources.
ANS: A PTS: 1 DIF: 2 REF: 11-0
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Private goods MSC: Interpretive

2. Government policy can potentially raise economic well-being
a. in all markets for goods and services.
b. in economic models, but not in reality.
c. when a good does not have a price attached to it.
d. never.
ANS: C PTS: 1 DIF: 2 REF: 11-0
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Market failure MSC: Interpretive

3. The old lyric “the best things in life are free”
a. is not true for any goods.
b. is even true for some goods that have a price.
c. refers to goods provided by nature or the government.
d. refers to goods provided by the market.
ANS: C PTS: 1 DIF: 2 REF: 11-0
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Market failure MSC: Interpretive

4. Governments can improve market outcomes for
a. public goods but not common resources.
b. common resources but not public goods.
c. both public goods and common resources.
d. neither public goods nor common resources.
ANS: C PTS: 1 DIF: 2 REF: 11-0
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Public goods | Common resources MSC: Interpretive

5. For most goods in an economy, the signal that guides the decisions of buyers and sellers is
a. preference.
b. government intervention.
c. quantity.
d. price.
ANS: D PTS: 1 DIF: 1 REF: 11-0
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Private goods MSC: Applicative

6. When goods do not have a price, which of the following primarily ensures that the good is produced?
a. buyers
b. sellers
c. government
d. the market
ANS: C PTS: 1 DIF: 1 REF: 11-0
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Public goods MSC: Applicative

THE DIFFERENT KINDS OF GOODS

1. The provision of a public good generates a
a. positive externality, as does the use of a common resource.
b. positive externality and the use of a common resource generates a negative externality.
c. negative externality, as does the use of a common resource.
d. negative externality and the use of a common resource generates a positive externality.
ANS: B PTS: 1 DIF: 2 REF: 11-1
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Public goods | Common resources MSC: Interpretive

2. The idea that “externalities arise because something of value has no price attached to it” is associated with
a. public goods, but not with common resources.
b. common resources, but not with public goods.
c. both public goods and common resources.
d. neither public goods nor common resources.
ANS: C PTS: 1 DIF: 2 REF: 11-1
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Externalities | Public goods | Common resources MSC: Interpretive

3. The provision of public goods gives rise to
a. no externalities.
b. positive externalities.
c. negative externalities.
d. rivalries in consumption.
ANS: B PTS: 1 DIF: 1 REF: 11-1
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Externalities | Public goods MSC: Interpretive

4. The provision of public goods gives rise to
a. positive externalities, as does the use of common resources.
b. positive externalities, whereas the use of common resources gives rise to negative externalities.
c. negative externalities, whereas the use of common resources gives rise to positive externalities.
d. negative externalities, as does the use of common resources.
ANS: B PTS: 1 DIF: 1 REF: 11-1
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Externalities | Public goods | Common resources MSC: Interpretive

5. Private decisions about consumption of common resources and production of public goods usually lead to an
a. efficient allocation of resources and external effects.
b. efficient allocation of resources and no external effects.
c. inefficient allocation of resources and external effects.
d. inefficient allocation of resources and no external effects.
ANS: C PTS: 1 DIF: 2 REF: 11-1
NAT: Analytic LOC: Markets, market failure, and externalities
TOP: Public goods | Common resources MSC: Interpretive

6. When a good is excludable,
a. one person’s use of the good diminishes another person’s ability to use it.
b. people can be prevented from using the good.
c. no more than one person can use the good at the same time.
d. everyone will be excluded from using the good.
ANS: B PTS: 1 DIF: 1 REF: 11-1
NAT: Analytic LOC: The study of economics and definitions in economics
TOP: Excludability MSC: Definitional

7. A good is excludable if
a. one person’s use of the good diminishes another person’s enjoyment of it.
b. the government can regulate its availability.
c. it is not a normal good.
d. people can be prevented from using it.
ANS: D PTS: 1 DIF: 1 REF: 11-1
NAT: Analytic LOC: The study of economics and definitions in economics
TOP: Excludability MSC: Definitional

8. Excludability is the property of a good whereby
a. one person’s use diminishes other peoples’ use.
b. a person can be prevented from using it.
c. a good is private, not public.
d. a good is public, not private.
ANS: B PTS: 1 DIF: 1 REF: 11-1
NAT: Analytic LOC: The study of economics and definitions in economics
TOP: Excludability MSC: Definitional

9. If people can be prevented from using a certain good, then that good is called
a. rival in consumption.
b. excludable.
c. a common resource.
d. a public good.
ANS: B PTS: 1 DIF: 1 REF: 11-1
NAT: Analytic LOC: The study of economics and definitions in economics
TOP: Excludability MSC: Definitional

10. Goods that are excludable include both
a. club goods and public goods.
b. public goods and common resources.
c. common resources and private goods.
d. private goods and club goods.
ANS: D PTS: 1 DIF: 2 REF: 11-1
NAT: Analytic LOC: Understanding and applying economic models
TOP: Excludability MSC: Applicative