20. Use the answer you found when adding market demand curves vertically in Question 1 above to find the market equilibrium quantity if the market supply is constant at 10. Ans: Q* = 14.
21. Suppose you are given the following demand curves: Q = 32 – P and Q = 16 – (P/2). Add these two demand curves vertically and find the market demand curve.
Ans: The demand curve has two portions. When Q is between 0 and 16, the demand curve is Q = (64/3) – (P/3). When Q is between 16 and 32, the demand curve is Q = 32 – P.
22. Suppose there is a public good that has market supply characterized by the equation X = (P/3) – (32/3). Suppose further that market demand for this good can be characterized by the equation X = 25 –P. Find the equilibrium quantity of the public good that will be supplied.
Ans: The two curves never intersect at a positive quantity; therefore, the amount of the public good provided will be zero.
23. The free rider problem causes less than optimal production of a public good. A) True.B) False.C) Uncertain.Ans: a
24. Pure private goods are nonrival in consumption. A) True.B) False.C) Uncertain.Ans: a
25. Most goods that are nonexcludable are pure public goods. A) True.B) False.C) Uncertain.Ans: c
26. Vertical summation of demand curves yield results equivalent to those of horizontal summation.
A) True.B) False.C) Uncertain.Ans: b
27. Increasing the quantity of a pure public good can be done at zero cost. A) True.B) False.C) Uncertain.Ans: b
28. Demand curves for pure public goods satisfy the law of demand. A) True.B) False.C) Uncertain.Ans: a
29. Pure public goods involve positive externalities. 30. A) True.B) False.C) Uncertain.Ans: a
30. Increases in spending on education will lead to an increase in student performance. A) True.B) False.C) Uncertain.Ans: c
31. Privatization means taking services that are supplied by the government and turning them over to the private sector for provision. A) True.B) False.C) Uncertain.Ans: a
32. Private goods are always provided by the private sector. A) True.B) False.C) Uncertain. Ans: b
33. The Global Positioning System (GPS) is an example of a good that is both non-rival and excludable good.
A) True.B) False.C) Uncertain.Ans: a
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