ECON 101 Exam 3 Overview
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Questions and Answers

What is the marginal cost of allowing an additional viewer to watch an on-demand movie?

  • Zero (correct)
  • The fixed cost of the service
  • $1
  • The cost of production

    • Why do goods that are excludable and nonrival in consumption often experience underconsumption?

  • There is too much competition in the market.
  • Producers lack the incentive to supply them.
  • They are too expensive for consumers.
  • Consumers pay a price higher than the marginal cost. (correct)

    • Which of the following correctly describes a public good?

  • Rival but can be made excludable
  • Nonexcludable and nonrival (correct)
  • Excludable and rival
  • Excludable and nonrival

    • What is the primary reason private goods can be efficiently produced in a competitive market?

    <p>They are excludable and rival in consumption.</p> Signup and view all the answers

    What problem arises due to the nonexcludable nature of public goods?

    <p>The free-rider problem.</p> Signup and view all the answers

    Which of the following is an example of a public good?

    <p>Public sewer system</p> Signup and view all the answers

    Why is the price for goods with zero marginal cost suggested to be zero for consumers?

    <p>To encourage more general consumption.</p> Signup and view all the answers

    Which of the following statements about public goods is true?

    <p>They contribute to a free-rider problem.</p> Signup and view all the answers

    Which of the following describes a private good?

    <p>Excludable and rival in consumption</p> Signup and view all the answers

    What type of good is described as nonexcludable and rival in consumption?

    <p>Common resources</p> Signup and view all the answers

    Which statement is characteristic of public goods?

    <p>They are nonexcludable and nonrival.</p> Signup and view all the answers

    What is the feature of artificially scarce goods?

    <p>Excludable but nonrival</p> Signup and view all the answers

    Which of the following goods exemplifies overconsumption?

    <p>Water in a river</p> Signup and view all the answers

    What will be the coverage for Exam 3?

    <p>Modules 27-34, 36</p> Signup and view all the answers

    How many questions will the Final Exam consist of?

    <p>50 questions</p> Signup and view all the answers

    What is the consequence for Achieve Assignment 10?

    <p>All students will receive a score of 100%.</p> Signup and view all the answers

    What problem is similar to the issues caused by common resources?

    <p>Negative externalities</p> Signup and view all the answers

    Which method can directly reduce the quantity of a common resource used to an efficient level?

    <p>Implementing a Pigouvian tax</p> Signup and view all the answers

    What is the role of tradable licenses in managing common resources?

    <p>They match the quantity of use to the efficient level.</p> Signup and view all the answers

    Assigning property rights over a common resource creates which of the following incentives?

    <p>Incentive to protect the resource</p> Signup and view all the answers

    Which of these is an example of an artificially scarce good?

    <p>On-demand movies</p> Signup and view all the answers

    What is a characteristic of a rival good?

    <p>Its consumption by one individual reduces availability for others.</p> Signup and view all the answers

    Why might artificially scarce goods face inefficiently low consumption?

    <p>Sellers charge a positive price despite zero marginal cost.</p> Signup and view all the answers

    Which type of good is characterized as nonrival and excludable?

    <p>Artificially scarce goods</p> Signup and view all the answers

    Why is excludability essential for markets to supply goods efficiently?

    <p>It allows producers to profit by only providing goods to paying consumers.</p> Signup and view all the answers

    What is the primary consequence of a good being nonexcludable?

    <p>Reduced willingness to pay from consumers.</p> Signup and view all the answers

    What does the free-rider problem imply for the production of nonexcludable goods?

    <p>It often results in inefficiently low production levels.</p> Signup and view all the answers

    What can be inferred about the relationship between private goods and market efficiency?

    <p>Rival consumption is necessary for the efficient supply of goods.</p> Signup and view all the answers

    Why are producers reluctant to supply nonexcludable goods?

    <p>They cannot be sure of recouping their costs.</p> Signup and view all the answers

    What is the outcome when consumers take a 'free ride' on nonexcludable goods?

    <p>Production levels may fall below what is needed for efficiency.</p> Signup and view all the answers

    How does being non-rival affect the market for excludable goods?

    <p>It allows consumption by multiple individuals without depleting the good.</p> Signup and view all the answers

    In the context of public goods, what is an example of a nonexcludable good mentioned?

    <p>A public park with no entry fee.</p> Signup and view all the answers

    What is a defining characteristic of public goods?

    <p>They are nonexcludable but not rival in consumption.</p> Signup and view all the answers

    How is the efficient quantity of a public good determined?

    <p>Where marginal social benefit equals marginal cost.</p> Signup and view all the answers

    What is the relationship between individual marginal benefits and marginal social benefit?

    <p>Marginal social benefit is the sum of individual marginal benefits.</p> Signup and view all the answers

    What can adequately describe a common resource?

    <p>Nonexcludable and rival in consumption.</p> Signup and view all the answers

    Which of the following best illustrates the concept of overuse in common resources?

    <p>An unregulated lake where anyone can fish.</p> Signup and view all the answers

    Why do individuals typically not pay for the efficient quantity of a public good?

    <p>The marginal social benefit is always less than individual benefits.</p> Signup and view all the answers

    Which method is commonly used to fund public goods?

    <p>Government funding supported by taxes.</p> Signup and view all the answers

    What type of pressure can lead to the provision of public goods in small communities?

    <p>Social encouragement or community pressure.</p> Signup and view all the answers

    Which item is classified as nonexcludable?

    <p>Central Park, New York</p> Signup and view all the answers

    What effect has the rise of the internet had on media such as movies and music?

    <p>Made these goods nonexcludable</p> Signup and view all the answers

    Which of the following statements about London’s traffic fee is true?

    <p>It encourages driving less during peak traffic</p> Signup and view all the answers

    Toilet paper is considered a rival good because:

    <p>It can only be used by one person at a time</p> Signup and view all the answers

    Which option correctly characterizes Central Park and cable television?

    <p>Central Park is nonexcludable, cable television is excludable</p> Signup and view all the answers

    Why might toilet paper be considered an essential good?

    <p>Everyone uses it at some point in time</p> Signup and view all the answers

    What is a defining characteristic of cable television?

    <p>It requires payment to access</p> Signup and view all the answers

    Which of the following best describes a public good?

    <p>It can be used by multiple people without diminishing availability</p> Signup and view all the answers

    Study Notes

    Course Information

    • Course name: ECON 101 – Principles of Microeconomics
    • Instructor: Kairon Shayne D. Garcia
    • Office: SSPA 351
    • Office hours: 9:00am-11:00am M/W (in-person)
    • Email: [email protected]
    • TA: Keanu Hua
    • Office: SSPA 323
    • Office hours: 3:30pm-4:30pm W/Th (in-person)
    • Email: [email protected]

    Exam 3

    • Date: December 4th
    • Modules covered: 27-34, 36
    • Modules not covered: 37-39
    • Exam Format: comprehensive exam (modules 1-to-date)
    • Number of questions: 50
    • Point value: 2 points each
    • Exam time: December 18th, 12:30pm-2:30pm

    Exam Rules

    • Same rules as Exam 2 apply to remaining exams
    • One-sided print paper reviewer sheet (handwritten)
    • Calculators allowed
    • Bonus points for Exam 3: +15 points (reached 70% survey response)

    Exam 3 Practice

    • Uploaded on Wednesday (11/20)
    • Answers uploaded by Wednesday (11/20)
    • Review in class

    Achieve Assignment 10

    • Not needed: Modules 37-39 are no longer covered
    • Score of 100% automatically awarded

    Achieve Assignment 9

    • Due date: 11/24
    • Must be completed

    Module 36: Public Goods and Common Resources

    • Comprehensive info on public goods and common resources is provided
    • Covering the characteristics of public goods and common resources

    Learning Points

    • Public goods and characteristics
    • Common resources and overconsumption
    • Four Types of Goods

    Four Types of Goods

    • Private goods: excludable and rival in consumption (e.g., wheat, bathroom fixtures)
    • Public goods: nonexcludable and nonrival in consumption (e.g., public sewer system, national defense)
    • Common resources: nonexcludable but rival in consumption (e.g., clean water, biodiversity)
    • Artificially scarce goods: excludable but nonrival in consumption (e.g., on-demand movies, computer software)

    Why Markets Can Supply Only Private Goods Efficiently

    • Markets can only supply goods and services efficiently if they are excludable and rival in consumption (private goods).
    • Excludability is crucial to ensure producers can earn sufficient profits to justify supplying goods.
    • Nonexcludable goods lead to the free-rider problem
      • Individuals are less motivated to pay for a good if they can consume it without paying
    • Producers lack incentive to produce nonexcludable and/or nonrival goods
    • Nonrival goods are crucial for the efficient production of goods
    • Inefficiently low consumption of nonrival goods
    • Private goods are efficiently produced only because sellers can earn profits from excludability

    Public Goods

    • Public good: nonexcludable and nonrival in consumption
    • examples: public sewer system, disease prevention, defense, scientific research
    • Free-rider problem: No motivation for individuals to financially support nonexcludable goods
    • Therefore, Public Goods are generally provided by government, or through other means

    Provide of Public Goods

    • Voluntary contributions
    • Individuals/firms making money indirectly
    • Ex: Broadcast Television/Social encouragement/pressure in small communities
    • Ex: Volunteer fire departments, National Defense, The legal system, Disease control

    How Much of a Public Good Should Be Provided?

    • Efficient quantity is where marginal social benefit = marginal cost of producing the good
    • Marginal social benefit is the sum of all individual willingness to pay for each unit of public good

    Common Resources

    • Common resource: nonexcludable and rival in consumption
    • Oversupply when left unregulated as individuals ignore negative impact on overuse of common resources on others
    • Overuse is a common problem

    The Efficient Use and Maintenance of Common Resources

    • Methods of efficient use of common resources
      • Tax or regulate use of common resource
      • Create a system of tradable licenses
      • Assign property rights

    Artificially Scarce Goods

    • Artificially scarce goods: excludable but nonrival in consumption
    • Example: on-demand movies
    • Marginal cost is low and zero for allowing an additional consumer to consume the good
    • Excludable: Sellers charge a positive price which leads to inefficiently low consumption
    • Similar problems to natural monopolies

    iClicker Questions

    • Brief summaries of the iClicker questions and answers regarding topics, and concepts covered throughout the presentation

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    Econ 101 - Principles of Microeconomics Lecture Notes - Week 13

    Description

    Prepare for your upcoming Exam 3 in ECON 101, covering modules 27-34 and 36. This comprehensive exam will consist of 50 questions, each worth 2 points, and will take place on December 18th. Review the exam rules and practice materials to maximize your performance.

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