Public Goods and Externalities

Which of the following is NOT an example of a public good?

• Fireworks display

• National Defense

• Public transportation

• Lighthouse

What is the free rider problem?

• scarcity even when you pay for a good

• Reaping all the benefits without contributing

• Common goods that don't have a price

• none of the above

What statement best explains why the government provides goods and services to its citizens?

• To provide benefits to small groups of people in certain areas of the country.

• To provide goods and services that would not be available if individuals had to provide them.

• To compete with businesses in the private sector.

• To make a large profit by providing certain goods and services to it's citizens.

Most governments are likely to pay for public goods and services through —

• donations from wealthy politicians

• donations from abroad

• revenue from sales and income taxes

• borrowings from abroad

Government mostly provide the following services EXCEPT —

• education

• entertainment

• healthcare

• infrastructure

What is one reason that local law enforcement is 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.

Which of the following is an example of a positive externality resulting from an outdoor band concert?

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

• A pair of endangered birds leave their nest in a nearby tree when the concert starts.

• A pizza parlor closes early, because all of its customers are at the concert.

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

The goal of government welfare programs is to

• maintain a poverty threshold that matches the median income.

• eliminate the dependence of people on the welfare system.

• eliminate the income gap between the richest Americans and the poorest.

• raise the standard of living of certain less-fortunate members of society.