Leader: Veronica
Course: Econ 101
Instructor: Kreider
Chapter 15
Public Goods
Supplemental Instruction
Iowa State University
Date: 11-18-14
1. Fill in the Chart
Define:
Public Good
Private Goods
Common Reasource
Marketable Public Good
“free-rider problem”
a good that is “non rival”
& “non exclusive” in
consumption.
a good that is “rival” &
“exclusive” in
consumption.
a good that is “rival” &
“non exclusive” in
consumption.
a good that is “non rival”
& “exclusive” in
consumption.
When everyone tries to
enjoy the benefits of a nonexcludable good without
paying, so private firms
cannot provide it.
Define in your
own words:
Example
light from a lighthouse,
radio broadcast, parks
Food, a chair, has a
physical form and can
count them
Fish in the ocean,
Oxygen, Sunlight
TV shows, Music,
Amusement Parks
Speeding, Car pooling
and no one fills up the
gas, parks
Review Questions:
2. Sunk Costs:
a. Are costs that cannot be avoided by shutting the business down
b. Are costs that very with the level of output
c. Are always associated with heavy machinery
d. Stay the same the same in the ling run as in the short run
3. Which of the following is not associated with a perfectly competitive industry?
a. Firms aggressively advertising the unique features of their differentiated products
b. Firms passively taking the market price as given
c. Free entry into the industry by new firms
d. All of the above are associated with perfectly competitive industries
4. An industry’s long-run supply curve will be upward sloping if:
a. New firms may enter but firms have different levels of minimum average costs
b. New firms may enter and all firms have the same technology but input prices will get bid up
as the number of firms grows
c. The number of firms is fixed and each has an upward sloping firm supply curve
d. Any of the above can be true
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In the figure, assume that average total costs and marginal costs are the same in the long and short runs.
5. At which of the following prices would a
competitive firm stay in business in the short run
but not in the long run?
a.
3
b.
5
c.
8
d.
None of the above
6. At which of the following prices would a
competitive firm stay in business in the long run
but not in the short run?
a.
3
b.
5
c.
8
d.
None of the above
Assume Mama Mia Pizza has: TR=12Q, where Q = # of pizzas sold & TC=2000 + 2Q
7. What is Mama Mia’s AFC if they sell 100 pizzas?
a. $120
b. $2000
c. $20
d. $22
8. How many pizzas must Mama Mia sell in order to break even?
a. 100
b. 200
c. 167
d. 143