Question : 41) The free rider problem refers to a situation in : 1387512

41) The free rider problem refers to a situation in which

A) people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.

B) the marginal cost of allowing additional consumers to consume a public good is zero.

C) high income individuals subsidize the production of goods, such as education, that make society better off.

D) markets fail to allocate resources efficiently when benefits outweigh costs.

42) Which of the following best illustrates the free rider problem?

A) Since no one owns elephants and elephants are valued for their hide, meat and ivory, elephants can be hunted to extinction.

B) For every purchase of a $30 fare card, you are entitled to five free bus rides.

C) If your neighbors professionally landscape their front yards, it is likely that the market value of your property will increase.

D) All three homeowners in a quiet cul-de-sac have expressed the desirability of security lighting in the common parking area. One of the homeowners installs the lighting and asks you to contribute toward the cost. You choose not to contribute.

43) “Free riding” is a characteristic of which type of good?

A) a private good

B) a common resource

C) a public good

D) a good that is both rival and excludable

44) Parents who do not have their children immunized and attempt to benefit from other parents who did have their own children immunized are exhibiting an economic behavior known as

A) excludability.

B) public rivalry.

C) free riding.

D) internalizing an external cost.

45) It is difficult for a private market to provide the economically efficient quantity of a public good because

A) by law, governments cannot use cost-benefit analysis to determine this quantity.

B) public goods produce positive and negative externalities.

C) individual preferences are not revealed in the market for the good.

D) it is too expensive to produce the necessary amount of the good.

46) The supply curve of a public goods shows

A) the total quantities that all producers are willing and able to supply at each price.

B) the maximum amount suppliers require to produce each quantity of the good.

C) the total cost of producing each unit of the good.

D) the marginal cost of producing each unit of the good.

47) The efficient output level of a public good occurs where the

A) greatest number of free riders occurs.

B) marginal cost of producing the last unit is equal to the marginal benefit realized by consumers.

C) total cost of production is affordable.

D) marginal cost of production is at its lowest.

 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.

48) Refer to Figure 5-16.  How much is Amit willing to pay to have 4 street lights installed?

A) $3,600

B) $2,700

C) $1,800

D) $900

49) Refer to Figure 5-16.  How much is Bree willing to pay to have 4 street lights installed?

A) $1,500

B) $1,800

C) $2,700

D) $7,200

50) Refer to Figure 5-16.  What is the optimal quantity of street lights to install?

A) 3

B) 4

C) 6

D) 9