Which of the following is true when there is optimal provision of a public good?
a. marginal cost = marginal rate of substitution for each consumer
b. total costs = total benefits for all consumers
c. each consumer's surplus = marginal cost
d. total consumer surplus = marginal cost
e. the sum of all consumers' marginal rates of substitution = marginal cost
Which of the following factors is likely to prevent private market forces from providing the optimal amount of a public good?
a. non-satiated preferences
b. large differences among individuals in their demand for the public good
c. little to no difference among individuals in their demand for the public good
d. Both a and b are correct.
e. Both b and c are correct.
Which of the following are reasons to be cautious about interpreting results from laboratory experiments in economics?
a. The experiments do not typically allow subjects to keep real money.
b. The typical subjects in the experiments may not be representative of the entire population.
c. The stakes are typically smaller in experiments than in the real world.
d. Answers a, b, and c are correct.
e. Both b and c are correct.
What property must a good satisfy to be a pure public good?
a. non-rival in consumption
b. rival in consumption
c. non-excludable
d. Both a and c are correct.
e. Both b and c are correct.
Which of the following MUST lead to less than a full crowd-out of private contributions toward a public good?
a. individuals deriving utility from their own individual contribution
b. warm glow from individual contribution
c. taxing non-contributors to the public good
d. Answers a, b, and c are correct.
e. Both a and b are correct.