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Exam 4: Public Goods

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Question 21

Multiple Choice

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A pure private good is

A) nonrival in consumption and subject to exclusion.
B) rival in consumption and subject to exclusion.
C) rival in consumption and not subject to exclusion.
D) all of these answer options are correct.

E) C) and D)
F) A) and B)

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Question 22

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Equilibrium for public goods is characterized by

A) MSB = MSB.
B) SMRS = MRT.
C) MRS₁ = MRS₂ = MRS₃ = … = MRS_n = MRT.
D) MC = MB.
E) MRS - MRT = MSB.

F) B) and D)
G) B) and C)

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Question 23

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From the figures below,the market price of rockets is

When asked to reveal their true preferences people

Suppose there is a public good that has market supply characterized by the equation X = (P/3)- (32/3).Suppose further that market demand for this good can be characterized by the equation X = 25 - P.Find the equilibrium quantity of the public good that will be supplied.

Suppose there are two individuals with identical demand curves characterized by the equation P = 2 - Q.What is market demand if these demand curves are added horizontally? Vertically?

When those that do not contribute to the costs of a public good are denied use,this is a case of

Discuss and contrast the advantages and disadvantages of public highways versus toll roads.

Demand curves for pure public goods satisfy the law of demand.

A private good is

Some people do not engage in free riding,even when there is no cost or chance or reprisal.Discuss why?

You have read that the free rider problem affects equilibrium in a public good context.Explain how this situation can be modeled as a prisoner's dilemma game.

Impure public goods

Suppose that there are only two fishermen,Zach and Jacob,who fish along a certain coast.They would each benefit if a lighthouse were built along the coast where they fish.The marginal cost of building each additional lighthouse is $150.The marginal benefit to Zach of each additional lighthouse is 90 - Q,and the marginal benefit to Jacob is 40 - Q,where Q equals the number of lighthouses. What is the efficient number of lighthouses?

Commodity egalitarianism refers to commodities that