Question : Figure 5-16 Amit and Bree the only two homeowners an isolated : 1387513

Figure 5-16

Amit and Bree are the only two homeowners on an isolated private road. Both agree that installing street lights along the road would be beneficial and want to do so. Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights and the marginal cost of installing the street lights.

51) Refer to Figure 5-16.  Suppose Amit and Bree know each other’s preferences so that it is not possible for one to deceive the other. Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

A) The optimal quantity will be installed only if the two parties agree to pay according to their willingness to pay as indicated by their respective demand curves.

B) Because there are only two consumers, it is likely that private bargaining will result in the optimal quantity being installed.

C) The optimal quantity will be installed only if the two parties split the cost of installation equally.

D) The optimal quantity will be installed only if Bree pays for the entire installation cost.

52) Which of the following is an example of a common resource?

A) elephants in the wild

B) lions in a zoo

C) a college education

D) public transportation

53) An important difference between the demand for a private good and the demand for a public good is that

A) individuals reveal their preferences for a public good but they do not have to reveal their preferences a private good.

B) the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned.

C) individuals reveal their preferences for a private good but they do not have to reveal their preferences for a public good.

D) the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.

54) In England during the Middle Ages each village had an area of pasture on which any family in the village was allowed to graze its cows and sheep without charge. Eventually, the grass in the pasture would be depleted and no family’s cow or sheep would get enough to eat. The reason the grass was depleted was

A) the area of pasture was nonexcludable and the consumption of the grass was rival.

B) self-interest motives led livestock owners to raise too many cows and sheep.

C) due to a policy of neglect on the part of the English government.

D) it did not get enough rainfall.

55) Haiti was once a heavily forested country. Today, 80 percent of Haiti’s forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has led to devastating floods when it rains heavily. This is an example of

A) tragic externalities.

B) the tragedy of the commons.

C) human greed.

D) the consequences of not having a market economic system.

56) Negative externalities and the tragedy of the commons are problems that have a common source. What is this common source?

A) self-interest motives of producers and consumers

B) a lack of concern for human rights

C) a lack of competition

D) a lack of clearly defined and enforced property rights

57) Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?

A) access to the commons can be restricted through community norms and laws

B) offer subsidies to consumers

C) force people to move away from the commons

D) persuade people to use less of the scarce resource through an advertising campaign

58) If the United States and other developed nations pay the cost of reducing public emissions, developing nations such as China could benefit from the reduction while not contributing to it. In this sense, one can think of reducing carbon emissions as being like a

A) public good.

B) private good.

C) quasi-private good.

D) quasi-public good.

59) A product is considered to be excludable if it is jointly owned by all members of a community.

60) A quasi-public good is similar to a public good in that one person’s consumption of the quasi-public good does not reduce the amount available for everyone else.