Question

Ten friends who love to ski decide to pool their financial resources and equally share the cost of a one-week time-share condominium in Alta, Utah. Suppose that the lift lines at the ski resort become more congested when the ten additional people start to ski. Which of the following statements is not correct?

	a.	Each of the ten friends would have been better off staying at home.
	b.	Use of the ski resort by the ten new skiers will yield a negative externality.
	c.	An increase in lift ticket prices could be viewed as a corrective tax on the externality of congestion.
	d.	The ski resort can reduce the congestion externality by raising lift ticket prices.

4 points   

QUESTION 5

Most lighthouses are operated by the government because

	a.	most lighthouses are only tourist attractions in state and national parks.
	b.	of the free-rider problem.
	c.	lighthouses are no longer valued by society.
	d.	shipping companies would not be able to afford maintenance fees for lighthouses.

4 points   

QUESTION 6

The Tragedy of the Commons describes

	a.	an effective cost-benefit analysis.
	b.	government regulation that is necessary to combat externalities.
	c.	the nonrivalry feature of a common resource.
	d.	overuse of a common resource relative to its economically efficient use.

4 points   

QUESTION 7

Which of the following goods is both excludable and rival in consumption?

	a.	fire protection in a small town
	b.	a wristwatch
	c.	efforts to fight poverty
	d.	fish in the ocean

4 points   

QUESTION 8

Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so?

	a.	to decrease taxes
	b.	to increase consumption
	c.	to fight poverty
	d.	to prevent overuse

Answer 1

(1st question) Option (a)

since the friends value skiing as a benefit for themselves, they would not be better-off sitting at home.

(Question 5) Option (b)

Lighthouse is non-excludable and non-rival in consumption and is subject to free rider problem since it is a public good.

(Question 6) Option (d)

When individuals seek to maximize self-interest, they overconsume a good leading to inefficient resource use.

(Question 7) Option (b)

A watch is a private good which is excludable and rival in consumption.

(Question 8) Option (d)

Public goods are typically overused due to free rider problem.