Public Goods & Externalities

What is one reason that firefighter services are considered a public good?

• Everyone in the community benefits from it.

• Nobody in the community has to pay for it.

• Private firms make a profit from producing it

• Individual citizens pay directly for it.

Public goods are examples of market failure, because producing these goods in the free market

• shows that the free enterprise system cannot distribute resources.

• helps entrepreneurs learn how to distribute public resources.

• does not allow for the efficient distribution of resources.

• encourages private businesses to distribute resources efficiently.

Which of the following is an example of a negative externality resulting from an outdoor concert in the park?

• College students near by get to enjoy free entertainment

• An elderly woman in her apartment hears a song that she liked as a child.

• A pizza parlor stays open later and makes a bigger profit than most nights

• A traffic jam occurs as drivers hunt for parking spots near the concert.

Which of the following explains why a city fireworks display on the Fourth of July is provided as a public good?

• Fireworks displays usually take place in a public area.

• Fireworks are a scarce resource.

• Nonpayers cannot be prevented from seeing the fireworks.

• Each consumer pays a fee to see the fireworks.

What is critical in determining whether something is produced as a public good?

• whether the market has the resources to provide it

• whether the benefits to society are greater than the total cost

• whether the government needs to use tax money to provide it

• whether the benefits are limited to the poor

Market failure occurs whenever

• free markets fail to distribute resources efficiently.

• goods fail to arrive at a market in a timely fashion.

• government builds infrastructure.

• voluntary exchange in a market fails to result in a sale.

Why has the United States space program been operated as a public good?

• Private enterprise does not have the technical skill needed to build the rockets that carry astronauts into space.

• The profit incentive for a private company to establish and run its own space program is too great.

• The inability of the American space program to land an astronaut on Mars is an example of market failure.

• It is impractical to exclude nonpayers from enjoying the scientific and technological benefits of the space program.

Use the image to answer the questions:

Which of the following best describes the use of the private bridge by the public?

• the efficient allocation of resources

• the free-rider problem

• positive externalities

• negative externalities