Question

Markets work well for some goods, but poorly for others. According to the textbook, for which of the following goods or services would markets be expected to work poorly?
A. clean air
B. clean water
C. clean amusement parks
D. Markets would work poorly for all three of the goods or services listed above.
E. Markets would work poorly for both clean air and clean water, but they would work well for clean amusement parks.

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. As a result,
(x) externality could be eliminated if all of the sheep owners received a subsidy payment from government.
(y) the town could auction off a limited number of sheep-grazing permits to correct this problem.
(z) the town could assign land property rights to individual owners to correct this problem.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only
15. Which of the following statements is (are) correct?
(x) If general knowledge is not excludable then it is quite likely that profit maximizing firms in private markets would choose to not supply general knowledge to society.
(y) As with many public goods, determining the appropriate level of government support for the production of general knowledge is difficult because benefits are hard to measure
(z) If technological knowledge is excludable and general knowledge is not excludable, then it is likely that technological knowledge is a “club good” (natural monopoly good) and general knowledge is a public good
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1