Question

5. In a Lindahl equilibrium,

a. each consumer purchases a pure public good up to the point at which his or her marginal benefit equals the marginal social cost of the good.

b. each person pays a tax per unit of the pure public good equal to his or her marginal benefit.

c. the sum of the marginal benefits of all consumers equals the marginal social cost of the good.

d. both (a) and (c) e. both (b) and (c)

6. The free-rider problem:

a. becomes more serious as the number of persons involved in voluntarily financing a pure public good decreases.

b. becomes more serious as the number of persons involved in voluntarily financing a pure public good increases.

c. is independent of the number of persons involved in a scheme to voluntarily finance a pure public good.

d. does not prevent voluntary cooperation from efficiently providing pure public goods.

7. The marginal cost of making a given quantity of a congestible public good available to more consumers is

a. always zero.

b. positive and increasing.

c. positive and decreasing.

d. zero at first but eventually becomes positive and increasing.

8. Cable TV programming is an example of a:

a. congestible public good.

b. price-excludable public good.

c. pure public good.

d. pure private good.

9. Which of the following is a good example of a congestible public good?

a. TV programming

b. a road

c. a loaf of bread d

. homeland security

10. Education is:

a. a pure public good.

b. a pure private good.

c. a good that has characteristics of both public goods and private goods.

d. not subject to the exclusion principle.

Answer 1

Answer-5. Correct option is 'e'

In a Lindahl equilibrium, each person pays a tax per unit of the pure public good equal to his or her marginal benefit and the sum of the marginal benefits of all consumers equals the marginal social cost of the good. At Lindahl equilibrium, three conditions must be met: every consumer demands the same amount of the public good and thus agrees on the amount that should be produced, consumers each pay a price (known as a Lindahl tax) according to the marginal benefit they receive, and the total revenue from the tax covers the full cost of providing the public good. Reaching Lindahl equilibrium requires the implementation of a Lindahl tax.

Answer-6. Correct option is 'b'

The free-rider problem becomes more serious as the number of persons involved in voluntarily financing a pure public good increases. The free-rider problem becomes more serious as the size of the group increases.

Answer-7. Correct option is 'd'

The marginal cost of making a given quantity of a congestible public good available to more consumers is zero at first but eventually becomes positive and increasing. Congestible public good are those public good that become rival when they are heavily used e.g. during rush hour the usage of roads by each additional cars causes congestion that diminishing the utility of other drivers.

Answer-8. Correct option is 'd'

Cable TV programming is an example of a pure private good. A private good is excludable, means it is possible to prevent a person from enjoying the benefits of a good if they have not paid.

Answer-9. Correct option is 'b'

A road is a good example of a congestible public good. Congestible public good are those public good that become rival when they are heavily used e.g. during rush hour the usage of roads by each additional cars causes congestion that diminishing the utility of other drivers.

Answer-10. Correct option is 'c'

Education is a good that has characteristics of both public goods and private goods. Education is a public good, it is non-excludable and non-rivalrous in school level. But higher education is unabiguously not a public good. It is excludable, since university can force student to pay tution fee before receiving an education.