21.Whenafree-riderproblemexists,
a.themarketwilldevotetoofewresourcestotheproductionofthegood.
b.thecostofthegoodwillalwaysbemorethanthebenefitofthegood.
c.thegoodwillnotbeproduced.
d.entrepreneurswilleventuallyfindawaytomakefree-riderspaytheirshare.
22.Afreeriderproblemariseswhen
a.thereareveryfewbeneficiariesandexclusionofanyoneofthemispossible.
b.therearemanybeneficiariesandexclusionofanyoneofthemispossible.
c.therearemanybeneficiariesandexclusionofanyoneofthemisimpossible.
d.thereareveryfewbeneficiariesandtheyalltrytousethegoodsimultaneously.
23.OntheFourthofJuly,thereisnofireworksdisplayinthesmalltownofYankeeville,eventhoughitwouldbeefficientforsuchadisplaytobeproduced.Whichofthefollowingstatementsiscorrect?
a.ThelackofafireworksdisplayinYankeevillearisesbecauseofanexternality.
b.ThelackofafireworksdisplayinYankeevilleisacaseofmarketfailure.
c.IndecidingnottoproduceafireworksdisplayinYankeeville,privateindividualsandprivatefirmsmadedecisionsthatwereprivatelyrationalbutsociallyinefficient.
d.Alloftheabovearecorrect.
24.OntheFourthofJuly,thereisnofireworksdisplayinthesmalltownofYankeeville,eventhoughitwouldbeefficientforsuchadisplaytobeproduced.Whichofthefollowingstatementsiscorrect?
a.ThelackofafireworksdisplayinYankeevillearisesbecauseofanexternality.
b.ThelackofafireworksdisplayinYankeevillearisesbecausethefree-riderproblemdoesnotapplytogoodssuchasfireworksdisplays.
c.IndecidingnottoproduceafireworksdisplayinYankeeville,privateindividualsandprivatefirmsmadedecisionsthatwereprivatelyirrational.
d.Alloftheabovearecorrect.
25.Publicschools,parks,libraries,androadsarepaidforlargelythroughtaxrevenuebecause
a.societyfindsthemsovaluablethatcitizensarehappytopayfortheirfullcost.
b.thesegoodscreateafree-riderproblem.
c.iftheywerefundedprivately,toomanyofthesegoodswouldbeproduced.
d.Alloftheabovearecorrect.
26.Supposethateveryonepreferstoliveinasocietywithoutpoverty.Furthersupposethatsomeprivatecharitiesaresuccessfulinreducingpoverty.Peoplewhodonotcontributetothecharities
a.receivenoexternalbenefitfromprivateantipovertyprograms.
b.decreasetherelianceofindividualsonantipovertyprograms.
c.canfreerideonthegenerosityofothers.
d.aremostlikelytobeinfavorofgovernment-sponsoredprograms.
27.MikeMilleristhetownmanagerofMedfield,atownwith50,000residents.Atarecenttownmeeting,severalcitizensproposedbuildingalargepublicswimmingpoolinthecenteroftownforalloftheresidentstoenjoy.Asurveyofall50,000residentsrevealedthatthepoolwouldbeworth$50toeachofthem.Becausethecosttobuildtheswimmingpoolisonly$1,000,000,ManagerMillerarrangestohavethepoolbuilt.Everyoneintownenjoysthepool,butwhenManagerMillerasksfordonationstopayforthepool,heonlycollects$250,000.ManagerMillersoonrealizesthat
a.thesurveywasconductedimproperly.
b.thecostofthepoolexceededthesocialbenefits.
c.thepool is a club good.
d.mostresidentsofthetownareprobablyfree-ridersatthepool.
28.MikeMilleristhetownmanagerofMedfield,atownwith50,000residents.Atarecenttownmeeting,severalcitizensproposedbuildingalargepublicswimmingpoolinthecenteroftownforalloftheresidentstoenjoy.Asurveyofall50,000residentsrevealedthatthepoolwouldbeworth$50toeachofthem.Thecosttobuildtheswimmingpoolis$1,000,000.Whichofthefollowingisthemostefficientoption?
a.Thepoolshouldbebuiltandpaidforwithdonationscollectedfromresidents,asthesedonationsshouldmorethancoverthecostofthepool.
b.Thepoolshouldbebuiltandpaidforbythetowngovernmentandpaidforwithataxontheresidentsbecauseallresidentswouldbenefitfromitbutsomeresidentswouldnotdonateiftheywereasked.
c.Thepoolshouldbebuiltandpaidforbythewealthiesttenpercentoftheresidents.
d.Thepoolshouldnotbebuiltbecausethesocialvaluedoesnotexceedthecost.
29.Privatemarketsusuallyfailtoprovidelighthousesbecause
a.lighthousescosttoomuchtobuildrelativetotheirbenefits.
b.governmentinterventionmakesithardforprivatelighthouseownerstocompeteinthemarket.
c.shipcaptainshaveincentivestouselighthouseswithoutpaying.
d.lighthousesarevaluedverylittlebyshipcaptainsthesedays.
30.Mostlighthousesareoperatedbythegovernmentbecause
a.ofthefree-riderproblem.
b.lighthousesarenolongervaluedbysociety.
c.mostlighthousesareonlytouristattractionsinstateandnationalparks.
d.shippingcompanieswouldnotbeabletoaffordmaintenancefeesforlighthouses.
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