Econ 252 Chapter 19 Questions with Correct Answers (Grade A+)
Question 1: Suppose that a private-sector firm produces two goods: Good 1 is a private good and good
2 is a public good. Which of the following statements is TRUE? - If a consumer spends more money on
good 1, she gets more good 1. - If a consumer spends more money on good 2, she gets more good 2. -If a
consumer spends less money on good 1, she gets less good 2 . -If a consumer spends less money on good
2, she gets less good 1.
Answer: If a consumer spends more money on good 1, she gets more good 1.
Question 2: Which of the following is a list of private goods ONLY?
Answer: a watermelon, a chair, a pencil
Question 3: Which of the following is a list of public goods ONLY?
Answer: national defense, a lighthouse, smog reduction
Question 4: Street lights are an example of a good that is:
Answer: nonexcludable and nonrival.
Question 5: Which of the following statements is TRUE? I. In order for society to have a sufficient level
of national defense, the government must tax the public to raise funds for a standing army. II. For
every 100 people that use a public good, approximately 500 people are prevented from using it. III.
People do not have an incentive to voluntarily pay for nonexcludable goods.
Answer: I and III only
Question 6: If markets underproduce public goods because of the free-rider problem:
Answer: it may be more efficient for the government to tax individuals to pay for the production of the
public good.
Question 7: A free rider is a person who:
Answer: receives the benefits of a good but avoids paying for it.
Question 8: A public good is:
Answer: nonrival and nonexcludable.
Question 9: People have little incentive to produce a public good because:
Answer: of the free-rider problem.
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Question 1: Suppose that a private-sector firm produces two goods: Good 1 is a private good and good
2 is a public good. Which of the following statements is TRUE? - If a consumer spends more money on
good 1, she gets more good 1. - If a consumer spends more money on good 2, she gets more good 2. -If a
consumer spends less money on good 1, she gets less good 2 . -If a consumer spends less money on good
2, she gets less good 1.
Answer: If a consumer spends more money on good 1, she gets more good 1.
Question 2: Which of the following is a list of private goods ONLY?
Answer: a watermelon, a chair, a pencil
Question 3: Which of the following is a list of public goods ONLY?
Answer: national defense, a lighthouse, smog reduction
Question 4: Street lights are an example of a good that is:
Answer: nonexcludable and nonrival.
Question 5: Which of the following statements is TRUE? I. In order for society to have a sufficient level
of national defense, the government must tax the public to raise funds for a standing army. II. For
every 100 people that use a public good, approximately 500 people are prevented from using it. III.
People do not have an incentive to voluntarily pay for nonexcludable goods.
Answer: I and III only
Question 6: If markets underproduce public goods because of the free-rider problem:
Answer: it may be more efficient for the government to tax individuals to pay for the production of the
public good.
Question 7: A free rider is a person who:
Answer: receives the benefits of a good but avoids paying for it.
Question 8: A public good is:
Answer: nonrival and nonexcludable.
Question 9: People have little incentive to produce a public good because:
Answer: of the free-rider problem.
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