Question : 11.2   Public Goods and the Free-Rider Problem 1) The free-rider problem : 1238673

11.2   Public Goods and the Free-Rider Problem

1) The free-rider problem exists because

A) private goods or services cause some people to want to take them for free.

B) some goods or services are excludable and cause envy for those who don’t have them.

C) some goods or services that are rival and leave some people without them.

D) people cannot be excluded from consuming public goods even if they don’t pay for them.

E) people must all consume the same public good and so everyone wants to pay for it.

2) The free-rider problem is associated with

A) public goods.

B) private goods.

C) common resources.

D) any type of good.

E) natural monopolies.

3) Public goods create a free-rider problem because

A) only people who pay for the good or service can enjoy the good or service.

B) people do not want to consume public goods.

C) the good or service is rival in nature.

D) the good or service is excludable.

E) people can enjoy the good or service no matter whether or not they pay for it.

4) A good that can be consumed even if the consumer does not pay for it

A) is necessarily rival in consumption.

B) completely avoids the free rider problem.

C) does not exist because firms won’t produce goods for which consumers won’t pay.

D) is nonexcludable.

E) might be nonexcludable but is definitely nonrival.

5) The free-rider problem

i.means that people can consume a good without paying for it.

ii.means that people pay too much for a good in order to consume it.

iii.applies to a public good.

A) i only

B) iii only

C) i and ii

D) ii and iii

E) i and iii

6) Which of the following is an example of the free-rider problem?

A) John attends a lecture on investing in high-tech companies for which he paid $100 to hear.

B) Tom watches Mystery on his local PBS television station, but Tom does not contribute anything to PBS.

C) Sarah works overtime while her co-workers opt for a traditional schedule.

D) Jethro buys a skunk-hunting permit that he refuses to share with his sister.

E) Katie catches a swordfish in the ocean.

7) Which of the following is a correct statement?

A) To obtain the economy’s marginal benefit for a public good, marginal benefits of all individuals at each quantity have to be added.

B) To obtain the economy’s marginal benefit for a public good, the quantity that all individuals are willing to buy at each price must be added.

C) To obtain the economy’s marginal benefit curve for a public good, we sum the individual demand curves horizontally.

D) Because public goods are nonexcludable, the economy’s marginal benefit curve for a public good is the same as its marginal cost curve.

E) None of the above answers is correct.

8) If we know everyone’s individual marginal benefit curve for a public good, then the economy’s marginal benefit curve for that public good can be found by

A) finding the average of everyone’s marginal benefit.

B) summing horizontally the amount of everyone’s marginal benefit.

C) summing vertically the amount of everyone’s marginal benefit.

D) averaging either horizontally or vertically the amount of everyone’s marginal benefit.

E) none of the above; it is impossible to find this value.

9) To find the economy’s marginal benefit curve of a public good, we

A) sum the marginal benefits of each individual at each quantity.

B) sum the costs of the inputs used to produce the good.

C) sum the quantities demanded at each individual price.

D) sum the prices consumers are willing to pay for different quantities of the good.

E) average the prices consumers are willing to pay for the same quantity of the good.

10) We determine the economy’s marginal benefit curve for a public good or service by

A) vertically summing the individual marginal benefit curves of each member of society.

B) horizontally summing the individual marginal benefits curves of each member of society.

C) multiplying the marginal benefits of each member of society.

D) dividing the sum of the marginal benefits of each member of society by the number of people in society.

E) vertically summing the individual firm’s marginal cost curves.