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Public Goods and Experimental Economics

Description: This quiz is designed to assess your understanding of the concept of public goods and how they are studied using experimental economics.
Number of Questions: 14
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Tags: public goods experimental economics externalities free riding
Attempted 0/14 Correct 0 Score 0

What is a public good?

  1. A good that is non-excludable and non-rivalrous.

  2. A good that is excludable but non-rivalrous.

  3. A good that is non-excludable but rivalrous.

  4. A good that is both excludable and rivalrous.


Correct Option: A
Explanation:

A public good is a good that is non-excludable, meaning that it is impossible to prevent people from consuming it, and non-rivalrous, meaning that one person's consumption of the good does not reduce the amount available to others.

What is the tragedy of the commons?

  1. The tendency for individuals to overconsume a public good.

  2. The tendency for individuals to underconsume a public good.

  3. The tendency for individuals to consume a public good at the expense of others.

  4. The tendency for individuals to conserve a public good.


Correct Option: A
Explanation:

The tragedy of the commons is the tendency for individuals to overconsume a public good because they do not bear the full cost of their consumption.

What is experimental economics?

  1. The study of economic behavior using controlled experiments.

  2. The study of economic behavior using mathematical models.

  3. The study of economic behavior using historical data.

  4. The study of economic behavior using surveys.


Correct Option: A
Explanation:

Experimental economics is the study of economic behavior using controlled experiments. In an experimental economics experiment, researchers create a controlled environment in which they can observe the behavior of individuals in response to different economic incentives.

How can experimental economics be used to study public goods?

  1. By creating a controlled environment in which individuals can make decisions about how much to contribute to a public good.

  2. By creating a controlled environment in which individuals can make decisions about how much to consume of a public good.

  3. By creating a controlled environment in which individuals can make decisions about both how much to contribute to and how much to consume of a public good.

  4. None of the above.


Correct Option: C
Explanation:

Experimental economics can be used to study public goods by creating a controlled environment in which individuals can make decisions about both how much to contribute to and how much to consume of a public good.

What is the free rider problem?

  1. The tendency for individuals to consume a public good without contributing to its provision.

  2. The tendency for individuals to contribute to the provision of a public good without consuming it.

  3. The tendency for individuals to both consume and contribute to the provision of a public good.

  4. None of the above.


Correct Option: A
Explanation:

The free rider problem is the tendency for individuals to consume a public good without contributing to its provision. This can lead to a situation in which the public good is underprovided.

What are some mechanisms that can be used to address the free rider problem?

  1. Coercion.

  2. Persuasion.

  3. Pricing.

  4. All of the above.


Correct Option: D
Explanation:

There are a number of mechanisms that can be used to address the free rider problem, including coercion, persuasion, and pricing.

What is the Lindahl mechanism?

  1. A mechanism for allocating public goods based on individual preferences.

  2. A mechanism for allocating public goods based on individual contributions.

  3. A mechanism for allocating public goods based on individual incomes.

  4. A mechanism for allocating public goods based on individual needs.


Correct Option: A
Explanation:

The Lindahl mechanism is a mechanism for allocating public goods based on individual preferences. In a Lindahl mechanism, individuals are asked to reveal their preferences for different levels of the public good and then the public good is provided at the level that maximizes the sum of individual utilities.

What is the Groves-Clarke mechanism?

  1. A mechanism for allocating public goods based on individual preferences.

  2. A mechanism for allocating public goods based on individual contributions.

  3. A mechanism for allocating public goods based on individual incomes.

  4. A mechanism for allocating public goods based on individual needs.


Correct Option: B
Explanation:

The Groves-Clarke mechanism is a mechanism for allocating public goods based on individual contributions. In a Groves-Clarke mechanism, individuals are asked to reveal their preferences for different levels of the public good and then they are asked to make a contribution to the provision of the public good. The public good is then provided at the level that maximizes the sum of individual utilities minus the sum of individual contributions.

What is the Vickrey-Clarke-Groves mechanism?

  1. A mechanism for allocating public goods based on individual preferences.

  2. A mechanism for allocating public goods based on individual contributions.

  3. A mechanism for allocating public goods based on individual incomes.

  4. A mechanism for allocating public goods based on individual needs.


Correct Option: B
Explanation:

The Vickrey-Clarke-Groves mechanism is a mechanism for allocating public goods based on individual contributions. In a Vickrey-Clarke-Groves mechanism, individuals are asked to reveal their preferences for different levels of the public good and then they are asked to make a contribution to the provision of the public good. The public good is then provided at the level that maximizes the sum of individual utilities minus the sum of individual contributions.

What are some of the challenges associated with using experimental economics to study public goods?

  1. The difficulty of creating a controlled environment in which individuals can make decisions about public goods.

  2. The difficulty of measuring individual preferences for public goods.

  3. The difficulty of inducing individuals to contribute to the provision of public goods.

  4. All of the above.


Correct Option: D
Explanation:

There are a number of challenges associated with using experimental economics to study public goods, including the difficulty of creating a controlled environment in which individuals can make decisions about public goods, the difficulty of measuring individual preferences for public goods, and the difficulty of inducing individuals to contribute to the provision of public goods.

Despite the challenges, why is experimental economics a valuable tool for studying public goods?

  1. Experimental economics allows researchers to control for confounding factors that may be present in field studies.

  2. Experimental economics allows researchers to observe individual behavior in a controlled environment.

  3. Experimental economics allows researchers to test different mechanisms for allocating public goods.

  4. All of the above.


Correct Option: D
Explanation:

Experimental economics is a valuable tool for studying public goods because it allows researchers to control for confounding factors that may be present in field studies, it allows researchers to observe individual behavior in a controlled environment, and it allows researchers to test different mechanisms for allocating public goods.

What are some of the most important insights that have been gained from experimental economics studies of public goods?

  1. Individuals tend to undercontribute to the provision of public goods.

  2. Individuals are more likely to contribute to the provision of public goods when they are informed about the benefits of the public good.

  3. Individuals are more likely to contribute to the provision of public goods when they are given the opportunity to communicate with each other.

  4. All of the above.


Correct Option: D
Explanation:

Experimental economics studies of public goods have provided a number of important insights, including the finding that individuals tend to undercontribute to the provision of public goods, that individuals are more likely to contribute to the provision of public goods when they are informed about the benefits of the public good, and that individuals are more likely to contribute to the provision of public goods when they are given the opportunity to communicate with each other.

How can the insights from experimental economics studies of public goods be used to improve public policy?

  1. By designing policies that encourage individuals to contribute to the provision of public goods.

  2. By designing policies that inform individuals about the benefits of public goods.

  3. By designing policies that give individuals the opportunity to communicate with each other about public goods.

  4. All of the above.


Correct Option: D
Explanation:

The insights from experimental economics studies of public goods can be used to improve public policy by designing policies that encourage individuals to contribute to the provision of public goods, by designing policies that inform individuals about the benefits of public goods, and by designing policies that give individuals the opportunity to communicate with each other about public goods.

What are some of the most promising areas for future research in experimental economics studies of public goods?

  1. The study of public goods in developing countries.

  2. The study of public goods in online environments.

  3. The study of the role of social norms in public goods provision.

  4. All of the above.


Correct Option: D
Explanation:

There are a number of promising areas for future research in experimental economics studies of public goods, including the study of public goods in developing countries, the study of public goods in online environments, and the study of the role of social norms in public goods provision.

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