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Microeconomics, 2e (Acemoglu)
Chapter 9 Externalities and Public Goods
9.1 Externalities
1) An externality occurs when ________.

A) the quantity demanded of a good exceeds the quantity supplied
B) the quantity supplied of a good exceeds the quantity demanded
C) the government regulates production and consumption decisions
D) an economic activity affects third parties not engaged in the activity
Answer: D
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Externalities
2) Which of the following is the best definition of an externality?

A) When firms sell products at a price greater than marginal cost
B) When government intervention in a market reduces consumer surplus
C) When an economic activity imposes spillover costs or benefits on a third party
D) When a worker takes a job "off the books" to avoid paying taxes
Answer: C
Difficulty: Easy
3) The market demand curve for a good shows ________, and the market supply curve shows ________.
A) consumers' willingness to pay for the good; producers' marginal cost of producing the good
B) producers' marginal cost of producing the good; consumers' willingness to pay for the good
C) consumers' willingness to pay for the good; the opportunity cost of producing the good
D) consumers' willingness to pay for the good; producers' total cost of producing the good
Answer: A
Difficulty: Easy
4) A ________ occurs when an economic activity has a spillover cost that does not affect those directly
engaged in the activity.
A) positive externality
B) negative externality
C) gain in producer surplus
D) gain in consumer surplus
Answer: B
Difficulty: Easy
1
Copyright © 2018 Pearson Education, Inc.
5) Externalities essentially create ________.
A) non-excludability in consumption
B) non-rivalry in consumption
C) a divergence between private and social costs
D) a free-rider problem
Answer: C
Difficulty: Easy
AACSB: Application of Knowledge
6) Which of the following is NOT true regarding externalities?

A) Externalities have no effect on market efficiency.
B) Externalities are imposed on agents other than the parties to an economic exchange.
C) Externalities can be either positive or negative.
D) Externalities can occur in either consumption or production.
Answer: A
Difficulty: Medium
7) Traffic congestion is an example of a ________.

C) pecuniary externality
D) free-rider problem
Answer: B
Difficulty: Easy
Topic: A "Broken" Invisible Hand: Negative Externalities
8) The social cost of producing a good that generates negative externalities is the sum of the ________.
A) average variable cost and the average fixed cost of production
B) average total cost and the marginal cost of production
C) private cost and external costs of production
D) total fixed cost and the total variable cost of production
Answer: C
Difficulty: Easy
9) When the production of a good generates negative externalities, ________.

A) the fixed cost of production is zero
B) the variable cost of production is zero
C) the private cost of production exceeds the social cost of production
D) the social cost of production exceeds the private cost of production
Answer: D
Difficulty: Easy
2
10) When the production of a good involves negative externalities, the marginal social cost curve will
most likely ________.
A) be parallel to the horizontal axis
B) be parallel to the demand curve
C) lie above the supply curve
D) lie to the right of the supply curve
Answer: C
Difficulty: Easy
11) In a market, social surplus is maximized when consumers' willingness to pay for a good equals the
________.
A) marginal private cost of producing the good
B) average variable cost of producing the good
C) marginal social cost of producing the good
D) opportunity cost of producing the good
Answer: C
Difficulty: Easy
12) If negative externalities are present in a market, ________.

A) the market price is higher than the socially optimal price
B) the quantity supplied in the market is larger than the socially optimal level
C) the marginal social cost of production is lower than the marginal private cost
D) the average cost of production exceeds the marginal cost of production at all output levels
Answer: B
Difficulty: Easy
13) If the production of a good involves negative externalities, ________.

A) the quantity of the good supplied in the market is lower than the efficient level
B) the optimal price of the good is higher than the market price of the good
C) total welfare can be increased by increasing the production of the good
D) the average cost of production can be reduced by increasing output above the optimal level
Answer: B
Difficulty: Easy
3
14) Deadweight loss refers to the loss in ________.
A) producer surplus due to a fall in the market price of a good
B) consumer surplus due to an increase in the market price of a good
C) total surplus due to a market distortion, such as an externality
D) total surplus due to a change in consumers' preferences
Answer: C
Difficulty: Easy
The following figure shows the private cost and social cost of producing Good X.
15) Refer to the figure above. What does the region EFG represent?
A) Consumer surplus
B) Producer surplus
C) Deadweight loss
D) Economic profit
Answer: C
Difficulty: Medium
16) Refer to the figure above. Total welfare can be increased by ________.
A) increasing output above Q1 units
B) reducing output below Q1 units
C) lowering the market price below P1
D) increasing the market price above P2
Answer: B
Difficulty: Medium
4
17) Refer to the figure above. Social surplus will be maximized when the quantity supplied of Good X is
________.
A) Q1 units
B) Q2 units
C) greater than Q1 units
D) greater than Q2 units
Answer: B
Difficulty: Medium
18) Refer to the figure above. Which of the following statements is true in this case?
A) P1 is the socially optimal price for Good X.
B) P2 is the price of Good X in a free market.
C) Q2 units is the efficient level of output of Good X.
D) Q2 units is the quantity supplied of Good X in a free market.
Answer: C
Difficulty: Medium
5
Scenario: In Brazil, more than 60 percent of sugar cane grown is harvested by hand. In São Paulo state,
nearly 300,000 workers are employed in sugar cane harvesting. Manual harvesting requires burning the
cane fields prior to harvest to remove the cane's sharp leaves and drive snakes from the fields. Burning
the cane fields, however, gives off large quantities of ammonia and nitrogen oxide, which lead to ozone
creation. In São Paulo state, a layer of ash covers cars, and nitrogen oxide levels double during the
harvest period. The nitrogen oxide produced from burning the cane fields can lead to acid rain and
changes in water quality.
19) Refer to the scenario above. In the graph below, the socially optimal level of production occurs at
which point?
A) Q0
B) Q1
C) Q2
D) Q3
Answer: C
Difficulty: Medium
6
20) Refer to the scenario above. The deadweight loss arising from hand-harvesting is represented by area
in the graph below.
A) A
B) B
C) C
D) D
Answer: D
Difficulty: Medium
21) A chemical factory releases its by-products into a nearby river, which harms aquatic flora and fauna.
This is an example of a ________.
A) free-rider problem
D) positive externality
Answer: B
Difficulty: Medium
22) Which of the following is likely to generate a negative externality?

A) Smoking a cigarette
B) Planting a tree
C) Consuming vegetarian food
D) Working for long hours
Answer: A
Difficulty: Medium
7
23) Which of the following is likely to give rise to a negative externality?
A) A sudden increase in the price of wheat due to a fall in supply
B) A sudden increase in the demand for diamonds, leading to an increase in their prices
C) Deforestation, leading to the extinction of many species
D) Globalization, leading to creation of many new job opportunities
Answer: C
Difficulty: Hard
24) The marginal social cost of producing the last unit of a good is $1.10, while the consumers' willingness
to pay for the last unit is $0.80. The deadweight loss from the production of the last unit of the good is
________.
A) $1.10
B) $1.90
C) $0.50
D) $0.30
Answer: D
Difficulty: Medium
25) When does the marginal social cost of producing a good exceed the marginal private cost of
producing it?
Answer: If the production of a good generates a negative externality, the marginal social cost of
producing the good exceeds the marginal private cost of producing it.
Difficulty: Easy
8
The following figure shows the market supply and demand of a good whose production entails a $2
negative externality per unit.
26) Refer to the figure above. A total of ________ units of this good will be traded in this market, at the
price of ________.
A) 80; $6
B) 20; $2
C) 60; $8
D) 40; $4
Answer: A
Difficulty: Easy
27) Refer to the figure above. The socially optimal price for this good should be ________.
A) $6
B) $4
C) $8
D) $7
Answer: D
Difficulty: Medium
9
28) Refer to the figure above. The socially optimal quantity of this good should be ________ units.
A) 60
B) 70
C) 80
D) 100
Answer: A
Difficulty: Medium
29) Refer to the figure above. The total cost of this externality to the society is equal to ________.
A) $2
B) $10
C) $20
D) $40
Answer: C
Difficulty: Medium
30) Why does the presence of negative externalities in the production of a good lead to an overproduction
of the good?
Answer: If the production of a good generates negative externalities, the marginal social cost of
producing the good exceeds the marginal private cost of producing the good. However, the producers of
the good do not take this external cost into account and continue producing as long as the marginal
private benefit from production exceeds the marginal private cost. This leads to an overproduction of the
good.
Difficulty: Medium
10
31) The drainage of chemical fertilizers used on agricultural plots along the banks of the Blue River has
led to the formation of a dead zone in the river that cannot support aquatic life. Without any government
intervention, will the market for fertilizers produce a socially optimal quantity? Why or why not? Explain
your answer with the help of suitable diagrams.
Answer: The equilibrium quantity of a good in a free market is determined by the interaction of the
market forces of demand, D, and supply, S, as shown in the figure below.
The market demand curve represents the marginal private benefit, and the supply curve represents the
marginal private cost. However, in this case, the use of chemical fertilizers imposes an additional cost on
society that is not explicitly recognized by its buyers and sellers. As a result, the cost of producing each
unit of output increases. The marginal social cost curve (MSC; see the figure below) shows the higher cost
of producing each unit of the good.
Social well-being is maximized when Q2 units of fertilizers are traded in the market. Therefore, from the
figures, it is evident that in the presence of negative externalities, the market quantity is higher than the
socially optimal level. The optimal price that should be charged for Q2 quantity of fertilizers is P2, which
is higher than the market price P1.
Difficulty: Medium
11
32) If there are costly negative externalities associated with an economic activity and that activity is
carried out until the (private) marginal benefit equals the (private) marginal cost, then ________.
A) this activity should be subsidized
B) the social marginal net benefit is positive
C) the private cost exceeds social costs
D) too many resources are being allocated to this activity
Answer: D
Difficulty: Medium
33) If a ton of newspaper costs $350 to produce and in the process causes $10 worth of pollution damage
to the environment, then ________.
A) the private cost is $360 per ton
B) the social cost is $10 per ton and the private cost is $350 per ton
C) the private cost is $360 per ton and the social cost is $340 per ton
D) the social cost is $360 per ton and the private cost is $350 per ton
Answer: D
Difficulty: Easy
34) The presence of external benefits associated with production implies that ________.
A) private output exceeds the socially optimal output
B) private output is less than the socially optimal output
C) private output corresponds to the socially optimal output
D) any of the above, depending on the relative magnitude of social and private benefits
Answer: B
Difficulty: Easy
Topic: A "Broken" Invisible Hand: Positive Externalities
35) Suppose only dues-paying members of a private outdoor sports club can access a lake. Club members
who are operating their jet skis on the lake disrupt the bass fishing of other club members. This example
describes a ________.
A) positive externality in production
B) negative externality in production
C) positive externality in consumption
D) negative externality in consumption
Answer: D
Difficulty: Medium
12
36) Due to ongoing budget shortfalls, the city of Detroit has suspended services, such as street cleaning
and maintenance of city-owned properties in several neighborhoods. In response, some homeowners in
these neighborhoods sweep the streets, replace street lights, and mow the grass on city-owned lots. These
actions by homeowners represent ________.
A) a positive externality in consumption
B) a positive externality in production
C) deadweight loss
D) a pecuniary externality
Answer: B
Difficulty: Medium
37) Which of the following occurs when an economic activity has a spillover benefit on third parties not
engaged in the activity?
A) A negative externality
B) A positive externality
C) A gain in producer surplus
D) A gain in consumer surplus
Answer: B
Difficulty: Easy
38) A positive externality ________.

A) gives rise to external benefits
B) leads to increasing returns to scale
C) imposes an additional cost on society
D) leads to a higher economic profit
Answer: A
Difficulty: Easy
39) If positive externalities are present in a free market, ________ at any output level.
A) the marginal cost of production equals the average cost of production
B) the marginal social cost of production exceeds the marginal private cost
C) the marginal private benefit from production equals the marginal social benefit
D) the marginal social benefit of production exceeds the marginal private benefit
Answer: D
Difficulty: Easy
13
40) Which of the following occurs if the production of a good gives rise to positive externalities?
A) The marginal social cost curve lies to the right of the supply curve.
B) The marginal social cost curve lies to the left of the supply curve.
C) The marginal social benefit curve lies to the right of the demand curve.
D) The marginal social benefit curve lies to the left of the demand curve.
Answer: C
Difficulty: Easy
41) Which of the following is true if the production of a good gives rise to a positive externality?
A) The marginal social benefit from each level of output exceeds the consumers' willingness to pay.
B) The marginal private benefit from production exceeds the marginal social benefit.
C) The demand curve for the good shifts to the left in the presence of positive externalities.
D) The demand curve for the good shifts to the right in the presence of positive externalities.
Answer: A
Difficulty: Medium
42) The presence of a positive externality in a market leads to a(n) ________.

A) underproduction of a good
B) overproduction of a good
D) fall in consumer surplus
Answer: A
Difficulty: Easy
43) If the production of a good involves positive externalities, ________.

A) the market price of the good is higher than its optimal price
B) the market price of the good is lower than its optimal price
C) the average cost of production of the good in the long run is zero
D) the variable cost of production of the good is zero
Answer: B
Difficulty: Easy
14
44) The consumption of a good entails a $2 positive external benefit per unit. The following graph shows
the market supply and demand of this good. Which of the dashed lines represents the marginal social
benefit curve?
A) Line 1
B) Line 2
C) Line 3
D) Line 4
Answer: C
Difficulty: Medium
15
The following figure shows the market supply and demand of a good whose consumption entails a $2
positive external benefit per unit.
45) Refer to the figure above. ________ units of this good will be traded in this market, at the price of
________.
A) 8; $6
B) 2; $2
C) 6; $8
D) 4; $4
Answer: A
Difficulty: Easy
46) Refer to the figure above. The socially optimal price for this good should be ________.
A) $6
B) $4
C) $8
D) $7
Answer: D
Difficulty: Medium
16
47) Refer to the figure above. The socially optimal quantity of this good should be ________ units.
A) 6
B) 7
C) 8
D) 10
Answer: D
Difficulty: Medium
The figure below shows the demand, supply, and marginal social benefit curves for Good Y.
48) Refer to the figure above. The MSB curve lies to the right of the demand curve because the production
of Good Y involves ________.
A) positive externalities
B) negative externalities
C) increasing returns to scale
D) decreasing returns to scale
Answer: A
Difficulty: Easy
49) Refer to the figure above. The market price of Good Y is ________.
A) $10
B) $17
C) $22
D) $20
Answer: B
Difficulty: Easy
17
50) Refer to the figure above. How many units of Good Y will be supplied when the market is free?
A) 9 million
B) 16 million
C) 13 million
D) 20 million
Answer: C
Difficulty: Easy
51) Refer to the figure above. Social welfare will be maximized if ________ units of Good Y are produced.
A) 9 million
B) 20 million
C) 13 million
D) 16 million
Answer: D
Difficulty: Medium
52) Refer to the figure above. The triangular region ABC represents the ________.
A) deadweight loss due to the presence of a pecuniary externality
B) deadweight loss due to the presence of a negative externality
C) economic loss of not recognizing a positive externality
D) inefficiency created by not recognizing a negative externality
Answer: C
Difficulty: Medium
53) Refer to the figure above. Social surplus can be increased by ________.
A) increasing output above 13 million units
B) reducing output below 13 million units
C) charging a price of $10
D) charging a price of $22
Answer: A
Difficulty: Easy
54) The production of a certain fertilizer emits a gas that keeps away mosquitoes and other insects from
the surrounding community. This is an example of ________.
A) a positive externality
B) absolute advantage
C) a pecuniary externality
D) comparative advantage
Answer: A
Difficulty: Easy
18
55) Which of the following is most likely to give rise to a positive externality?
A) A sudden increase in the price of oil due to a supply shock
B) A decrease in the price of barley due to a good harvest
C) Deforestation leading to the extinction of many species
D) The consumption of a drug to cure a communicable disease
Answer: D
Difficulty: Hard
56) The local community of the town of Montesia decides to plant trees every month as part of its green
initiative. Which of the following is true?
A) The marginal social cost of planting trees is lower than the marginal private cost of planting trees.
B) The marginal private benefit from planting trees is higher than the marginal social benefit of planting
trees.
C) There is an external benefit from planting trees.
D) There is a deadweight loss in planting trees.
Answer: C
Difficulty: Medium
57) The marginal social benefit from the production of the last unit of a good is $4,800. If the willingness
to pay for that unit is $3,900, what is the external benefit from its production?
A) $900
B) $8,700
C) $3,800
D) $4,100
Answer: A
Difficulty: Hard
58) Which of the following activities is most likely to give rise to a positive externality?
A) Jogging every morning
B) Getting a flu vaccination
C) Consuming organic products
D) Buying a pair of gloves
Answer: B
Difficulty: Medium
19
59) Which of the following results in a positive externality?
A) Going to the beach
B) Recycling waste
C) Buying a room heater
D) Following a healthy lifestyle
Answer: B
Difficulty: Easy
60) If too little of a good is being produced in the free market, the production of the good is likely to have
a ________.
C) low per-unit cost of production
D) high opportunity cost of production
Answer: A
Difficulty: Easy
20
61) Cleanliness experts say that cleaning a house hygienically helps prevent the spread of germs in the
area. What is the inefficiency created by not recognizing the linkage between cleaning the house and
preventing the spread of germs? Explain with a suitable diagram.
Answer: The optimal quantity of a good in a free market is determined by the interaction of the market
forces of demand, D, and supply, S, as shown in the figure below.
The market demand curve represents the marginal private benefit, and the supply curve represents the
marginal private cost. In this case, the cleaning of a house creates external social benefits. The marginal
social benefit curve, or MSB curve, in the diagram below represents the private and external benefits of
cleaning each additional house.
Houses will be cleaned until the marginal cost of cleaning one more house equals the marginal private
benefit derived from cleaning, not the marginal social benefit. Therefore, only Q1 number of houses will
be cleaned, even though Q2 houses need to be cleaned to maximize social well-being.
Difficulty: Hard
21
Scenario: Vacant houses, foreclosed or abandoned, are typically boarded up with plywood that many
people consider unsightly and likely to invite vandalism. An alternative is clear plastic (polycarbonate)
panels. The figure below shows the demand and the supply of polycarbonate panels used for boarding
up houses in a hypothetical town. To answer some of the questions below, it will be useful to find the
equations of the three lines in the figure.
62) Refer to the scenario above. Use of polycarbonate panels to board up vacant houses has a ________.
A) negative externality
B) positive externality
D) gain in consumer surplus
Answer: B
Difficulty: Easy
63) Refer to the scenario above. For each additional polycarbonate panel generates ________ worth of
social benefit beyond the private marginal benefit.
A) $100
B) $75
C) $60
D) $0
Answer: C
Difficulty: Easy
22
64) Refer to the scenario above. If only the private marginal benefits are taken into account, then ________
panels will be bought at ________ per panel. Use the equations for the demand and the supply curves.
A) 70; $70
B) 60; $60
C) 50; $60
D) 60; $70
Answer: A
Difficulty: Medium
65) Refer to the scenario above. If the private marginal benefits as well as external benefits are taken into
account, then ________ panels will be bought at ________ per panel. Use the equations of the demand and
the supply curves.
A) 90; $90
B) 100; $80
C) 80; $100
D) 100; $100
Answer: D
Difficulty: Medium
66) Refer to the scenario above. The deadweight loss associated with ignoring external benefits is
________. Use the equations of the demand and the supply curves.
A) $900
B) $1,000
C) $1,150
D) $1,275
Answer: A
Difficulty: Medium
67) A ________ externality occurs when a market transaction affects others through market prices.
A) positive
B) negative production
C) negative consumption
D) pecuniary
Answer: D
Difficulty: Easy
Topic: Pecuniary Externalities
23
68) Which of the following gives rise to a pecuniary externality?
A) Excessive consumption of alcohol leading to bad health
B) A sudden increase in the demand for diamonds, leading to an increase in their prices
C) Deforestation, leading to the extinction of many species
D) Globalization, leading to the displacement of indigenous workers
Answer: B
Difficulty: Hard
69) Jack wants to buy a new house. But the surge in housing demand over the past few months has led to
a sharp increase in housing prices, making it impossible for him to buy one on his current income. This is
an example of a ________.
D) conspicuous externality
Answer: C
Difficulty: Medium
70) The increasing popularity of hot dogs in a food joint has pushed up their prices, making it
unaffordable for many students living in the surrounding areas. This is an example of a ________.
D) free-rider problem
Answer: C
Difficulty: Easy
71) Which of the following is necessary for markets to operate efficiently?

A) A positive externality
B) A negative externality
C) A pecuniary externality
D) Free-riding
Answer: C
Difficulty: Easy
24
72) What are pecuniary externalities? Explain with the help of an example.
Answer: A pecuniary externality occurs when a market transaction affects other people through market
prices. For example, if a large number of consumers decide to purchase a car, the price of the car will
increase due to an increase in demand. This creates a pecuniary externality for other potential buyers of
the car in the form of higher prices.
Difficulty: Easy
9.2 Private Solutions to Externalities
1) An economic agent ________ when he accounts for the full costs and benefits of his actions.
A) is called a free rider
B) internalizes an externality
C) maximizes his profit
D) is called a rent seeker
Answer: B
Difficulty: Easy
Topic: Private Solutions to Externalities
2) Which of the following occurs when an externality is internalized?

A) An increase in social well-being
B) An increase in private benefit
C) An increase in deadweight loss
D) An increase in returns to scale
Answer: A
Difficulty: Easy
Topic: Private Solutions to Externalities
Scenario: Ron plays loud music, which prevents his neighbor from studying. He knows that his neighbor
values studying at $5,000, while the cost of soundproofing Ron’s room is $3,000.
3) Refer to the scenario above. Which of the following problems is likely to occur?
A) The tragedy of commons
B) A free-rider problem
C) A pecuniary externality
D) A negative externality
Answer: D
Difficulty: Medium
Topic: Private Solution: Bargaining
25
4) Refer to the scenario above. If Ron has the right to listen to music at night, how much does his neighbor
need to pay him to stop playing music?
A) Any amount above $5,000
B) Any amount below $3,000
C) Any amount between $3,000 and $5,000
D) Any amount between $5,000 and $8,000
Answer: C
Difficulty: Medium
5) Which of the following will lead to an efficient private solution if negative externalities are present in a
market?
A) The government paying a subsidy to the parties involved in generating externalities
B) The party creating the externality having legal property rights
C) The party suffering from the externality having legal property rights
D) The parties involved negotiating with each other and reaching an agreement
Answer: D
Difficulty: Easy
6) When does a private solution to a negative externality fail to allocate resources efficiently?
Answer: Private bargaining between the party generating a negative externality and the party suffering
from it leads to an efficient allocation of resources. However, such a private solution fails to allocate
resources efficiently when the transaction costs associated with bargaining are too high and the number
of affected people is large.
Difficulty: Easy
7) Beth can earn $7,500 renting out her house. However, her neighbor has a pet dog that chases anybody
who comes to look at the house. Because her neighbor has the right to keep his pet untied, Beth is unable
to find a tenant. If her neighbor values keeping his pet untied at $1,500, what will the efficient outcome be
in this case?
Answer: An efficient outcome in this case can be achieved if Beth strikes a private deal with her
neighbor convincing him to keep his pet indoors. Because Beth can earn $7,500 renting out her house and
her neighbor values keeping his pet outdoors at $1,500, total well-being can be increased if Beth pays her
neighbor an amount between $1,500 and $7,500 to keep his pet indoors.
Difficulty: Medium
26
Scenario: The following figure shows the private cost and social cost of producing Good X. Firm A is the
producer of Good X. The production plant and Bob's house are located next to a river. However, the plant
is upstream, and Bob's house is downstream. Since production pollutes the river, Bob suffers from a
negative externality.
8) Refer to the scenario above. What is the value of the negative externality imposed on Bob when the
firm produces to maximize its private net benefits?
A) (b d) e
B) (a c) f
C) d e
D) c f
Answer: B
Difficulty: Medium
9) Refer to the scenario above. What is the value of the negative externality imposed on Bob when the
firm produces the socially optimal quantity?
A) (b d) e
B) (a c) f
C) d e
D) c f
Answer: A
Difficulty: Medium
27
10) Refer to the scenario above. If the property rights to the river belong to the firm, what is the maximum
transfer between the two party necessary to make the firm produce the socially optimal quantity?
A) A payment of ((a c) f) ((b d) e) from the firm to Bob
B) A payment of ((a c) f) ((b d) e) from Bob to the firm
C) A payment of (a c) (f e)/2 from the firm to Bob
D) A payment of (b d) (f e)/2 from Bob to the firm
Answer: B
Difficulty: Hard
11) Refer to the scenario above. If the property rights to the river belong to the firm, what is the minimum
transfer between the two party necessary to make the firm produce the socially optimal quantity?
A) A payment of ((a c) f) ((b d) e) from the firm to Bob
B) A payment of ((a c) f) ((b d) e) from Bob to the firm
C) A payment of (a c) (f e)/2 from the firm to Bob
D) A payment of (b d) (f e)/2 from Bob to the firm
Answer: D
Difficulty: Hard
12) In 1973, economist Steven N. S. Cheung wrote an article demonstrating that private bargaining
between beekeepers and agricultural producers achieved the efficient outcome in the market for
pollination services in Washington state ("The Fable of the Bees: An Economic Investigation." Journal of
Law and Economics 16, no. 1 (1973): 11—33). Strong colonies of honeybees are necessary for pollinating
some crops, and they also increase yields. Colonies that are co-located with good pollen sources produce
more honey. Suppose the following facts describe the market for pollination services for seed alfalfa in
Washington state: seed alfalfa growers harvest an additional $4,000 worth of alfalfa seed when honeybees
are co-located with their crop; beekeepers realize an additional $1,500 worth of honey when their bee
colonies are co-located with alfalfa; and the cost of moving to another alfalfa grower's field is $500. What
amount of payment from the alfalfa grower to the beekeeper will result in a market for pollination
services that achieves the efficient outcome? Explain your answer.
A) $0
B) $500
C) $2,000
D) $5,000
Answer: C
Explanation: Any payment from the alfalfa grower to the beekeeper that exceeds $1,000 (the gain in the
value of honey minus the relocation cost) and is less than $4,000 (the gain in value of alfalfa seed harvest
to the grower) will result in (1) a mutually advantageous trade and (2) the creation of a market for
pollinating services that achieves the efficient outcome.
Difficulty: Hard
28
Scenario: The following excerpt is from Timothy R. Hylan, Maureen J. Lage, and Michael Treglia, "The
Coase Theorem, Free Agency, and Major League Baseball: A Panel Study of Pitcher Mobility from 1961 to
1992" ( Southern Economic Journal 62, no. 4 (1996): 1029—42).
Many economists and legal scholars interpret the [Coase] theorem as containing two propositions. The
first is that, in the absence of transactions costs and wealth effects, parties will bargain to an efficient
outcome. The second holds that the same outcome will be achieved regardless of the distribution of
property rights. … Major League Baseball [MLB] presents a natural experiment consisting of an industry
in which there has been an explicit change in the assignment of property rights. Beginning in 1879, … a
player could negotiate salary only with the team that owned his contract and the team could trade or sell
the player as management saw fit. In 1976 this system was replaced by the institution of free agency
whereby a player with at least six years of Major League experience acquired the right to sell his services
to prospective buyers…. The empirical analysis shows that after the introduction of free agency, the
pitchers with greater longevity in the major leagues are less likely to move relative to their mobility in the
pre-free agency period. The results also indicate that, in general, better pitchers are less likely to move
and that pitchers playing on teams with higher winning percentages or in large market cities were less
likely to move.
13) Refer to the scenario above. If the Coase Theorem holds for baseball playing services in MLB, which of
the following should be expected after the introduction of free agency?
A) Free agents will be paid more than non-free agents.
B) Pattern of mobility (changing teams) by players with similar characteristic and performance should be
similar before and after the introduction of free agency.
C) Outcome of bargaining between teams and players will be inefficient after the introduction of free
agency.
D) Free agents will be less likely to be unemployed than non-free agents.
Answer: B
Difficulty: Easy
Topic: The Coase Theorem
14) Refer to the scenario above. What does the empirical analysis by these researchers imply?
A) MLB incurred a large loss of revenue after 1976.
B) Players who became free agents were able to negotiate a better terms than non-free agents.
C) The Coase Theorem does not hold for baseball playing services in MLB.
D) The Coase Theorem holds for baseball playing services in MLB.
Answer: C
Difficulty: Easy
29
15) Refer to the scenario above. Which of the following could be a cause for different patterns of player
mobility in MLB before and after 1976?
A) Property rights for players' services are not clearly defined in MLB.
B) The number of teams relative to the number of players is large.
C) MLB is a monopoly in professional baseball games in the United States.
D) Transaction costs are associated with negotiating with individual free agents.
Answer: D
Difficulty: Hard
16) Which of the following is the best description of the Coase Theorem?
A) Tariffs can improve economic efficiency.
B) Public goods are over-provided by the private market.
C) Bargaining between private parties to an economic exchange results in an efficient allocation of
resources.
D) Only the government can force private parties to internalize externalities.
Answer: C
Difficulty: Easy
17) Which of the following is a reason that the Coase Theorem does not work in practice?
A) Transaction costs
B) Taxes
C) Lack of clearly defined property rights
D) Number of agents involved in bargaining
Answer: B
Difficulty: Easy
18) The cost of making an economic exchange is called a(n) ________ cost.
A) sunk
B) transaction
C) social
D) accounting
Answer: B
Difficulty: Easy
30
Scenario: A chemical factory is located upstream on a river. The factory dumps its liquid waste into the
river. A microbrewery is located downstream on this river; it uses the river water in its production
process and values the clean water. The chemical factory can filter its liquid waste before dumping it into
the river, but it would be costly to the factory. The table below shows the profit to these two businesses
under different circumstances.
Profit with Filtering Profit without Filtering

Chemical factory $1,000 $800
Microbrewery $400 $100
19) Refer to scenario above. Suppose the negotiation between the chemical factory and microbrewery is
costless. What is the maximum that the microbrewer would be willing to pay the chemical factory to filter
its waste?
A) $100
B) $200
C) $300
D) $400
Answer: C
Difficulty: Easy
20) Refer to scenario above. Suppose the negotiation between the chemical factory and microbrewery is
costless. What is the minimum offer that the chemical factory would be willing to accept from the
microbrewery to to filter its waste?
A) $100
B) $200
C) $300
D) $400
Answer: B
Difficulty: Easy
21) Refer to scenario above. Could this externality problem be resolved by private negotiations between
the chemical factory and the microbrewery?
A) Yes, but only when the negotiations are relatively costless.
B) Yes, but the chemical factory should be forced to pay a fine for polluting the river.
C) No, because filtering the waste decreases the profit of the chemical factory.
D) No, because dumping the waste into the river is free for the chemical factory.
Answer: A
Difficulty: Easy
31
22) Refer to scenario above. Suppose the microbrewery has the right to clean water. What would the
Coase Theorem suggest as the resolution of this negative externality conflict between these two firms?
A) The microbrewery pays $200 to the chemical factory to filter its waste before dumping it into the river.
B) The chemical factory voluntarily filters its waste before dumping it into the river.
C) The chemical factory pays $200 to the microbrewery to get permission to dump into the river.
D) The chemical factory pays $300 to the microbrewery to get permission to dump into the river.
Answer: B
Difficulty: Medium
23) Refer to scenario above. Suppose the chemical factory has the right to dump its waste into the river.
What would the Coase Theorem suggest as the resolution of this negative externality conflict between
these two firms?
A) The microbrewery pays $100 to the chemical factory to filter its waste before dumping it into the river.
B) The chemical factory voluntarily filters its waste before dumping it into the river.
C) The microbrewery pays $250 to the the chemical factory to filter its waste before dumping it into the
river.
D) The chemical factory pays $300 to the microbrewery to get permission to dump into the river.
Answer: A
Difficulty: Medium
24) Which of the following is an implication of the Coase Theorem?

A) Bargaining cannot lead to an efficient allocation of resources.
B) Government intervention is not always necessary to solve externality problems.
C) Negotiation leads to an efficient outcome if transaction costs are high.
D) Taxation leads to an efficient allocation of resources regardless of who holds the property rights.
Answer: B
Difficulty: Easy
25) Private solutions to externalities are most effective if ________.

A) the transaction costs associated with bargaining are low
B) the transaction costs associated with bargaining are high
C) property rights are not defined clearly
D) a large number of people are affected by the externalities
Answer: A
Difficulty: Easy
32
26) The Coase Theorem relies on internalizing externalities through ________.
A) social enforcement mechanisms
B) the provision of corrective subsidies
C) the imposition of corrective taxes
D) negotiations between the parties involved
Answer: D
Difficulty: Medium
27) What does the Coase Theorem predict?

Answer: The Coase Theorem predicts that if the production or consumption of a good involves a
negative externality, bargaining between the party creating the externality and the party suffering from it
will result in an efficient allocation of resources. Bargaining leads to a socially efficient outcome,
irrespective of who holds the legal property rights if transaction costs are not too high.
Difficulty: Easy
28) In episode 12 of the sixth season of The Sopranos, A. J. is watching television with his girlfriend Bianca
at her apartment when a group of neighborhood youths begins playing music at a very loud level
outside. A. J. approaches the youths and offers them his new mountain bike if they will stop playing the
music and leave. The group of youths accepts the mountain bike and leaves. This scene is an example of
________.
A) pecuniary externality
B) high transaction costs preventing bargaining from reaching the efficient outcome
C) the large number of parties involved in an exchange preventing bargaining from reaching the efficient
outcome
D) the Coase Theorem
Answer: D
Difficulty: Medium
29) Energy Star is a voluntary labeling program designed to identify and promote energy-efficient
products to reduce greenhouse-gas emissions. In this example, ________ is used to solve an externality.
A) the Coasian approach
B) the Pigouvian approach
C) a command-and-control mechanism
D) a social enforcement mechanism
Answer: D
Difficulty: Easy
Topic: Private Solution: Doing the Right Thing
33
30) The Trump administration proposes to de-fund the Energy Star program. If the program is
discontinued, we would expect ________.
A) the deadweight loss from greenhouse gas emissions to increase
B) an end to negative externalities in the consumption of consumer electronics
C) producers to raise the price of consumer electronics
D) private parties to achieve the efficient outcome through bargaining
Answer: A
Difficulty: Medium
31) People seldom break a line while waiting for checkout in a supermarket. In this example, ________ is
used to solve an externality.
A) the Coasian approach
B) the Pigouvian approach
C) a command-and-control mechanism
D) a social enforcement mechanism
Answer: D
Difficulty: Easy
34
9.3 Government Solutions to Externalities
1) Government invention is required to solve externality problems if ________.

A) transaction costs associated with private negotiations are low
B) the number of people affected by the externality is small
C) the number of people affected by the externality is large
D) property rights are clearly defined
Answer: C
Difficulty: Easy
Topic: Government Solutions to Externalities
Scenario: Vacant houses, foreclosed or abandoned, are typically boarded up with plywood that many
people consider unsightly and likely to invite vandalism. An alternative is clear plastic (polycarbonate)
panels. The figure below shows the demand and the supply of polycarbonate panels used for boarding
up houses in a hypothetical town. Suppose that there are 140 houses that are vacant and the town council
makes it illegal to use plywood to board them up, leaving only polycarbonate panels as an alternative. To
answer some of the questions below, it will be useful to find the equations of the three lines in the figure.
2) Refer to the scenario above. The council's action is an example of ________.

A) a command-and-control policy
B) a market-based policy
C) a corrective tax
D) a corrective subsidy
Answer: A
Difficulty: Easy
Topic: Government Regulation: Command-and-Control Policies
35
3) Refer to the scenario above. What would be the price of a polycarbonate panel after the ban on
plywood?
A) $200
B) $150
C) $140
D) $100
Answer: C
Difficulty: Easy
4) Refer to the scenario above. What is the deadweight loss associated with the council's action relative to
the socially efficient outcome?
A) $400
B) $900
C) $1,200
D) $1,600
Answer: A
Difficulty: Medium
5) A government regulation that bans the use of a certain polluting technology in the production of a
good is an example of a ________ used to solve an externality.
A) social enforcement mechanism
B) command-and-control approach
C) market-based approach
D) Coasian approach
Answer: B
Difficulty: Medium
6) A law stating that power plants are allowed zero emissions of sulfur dioxide is an example of ________.
A) the Coase Theorem
B) command-and-control regulation
C) a Pigovian corrective tax
D) a Pigovian corrective subsidy
Answer: B
Difficulty: Easy
36
7) Oil production by oil companies that use fracking can impose a ________ in the form of ________.
A) positive externality; higher employment rate
B) positive externality; lower oil price
C) negative externality; earthquakes
D) negative externality; higher oil price
Answer: C
Difficulty: Easy
Topic: Evidence-Based Economics: What Can the Government Do to Lower the Number of Earthquakes in
Oklahoma?
8) The practice of fracking by the oil and gas companies produces saltwater as its by-product. The
disposal of the saltwater can lead to earthquakes. What did the government of the state of Oklahoma do
to reduce the number of earthquakes in the state?
A) It fined the oil and gas companies a certain fee per each earthquake.
B) It banned the practice of fracking.
C) It put a limit on how much saltwater the oil and gas companies could dispose of.
D) It let the market forces achieve the socially optimal outcome by themselves.
Answer: C
Difficulty: Medium
Oklahoma?
9) Which of the following is a market-based alternative to the Kansas state government's approach to
reduce earthquakes as described in the textbook?
A) Impose a tax according to the amount of saltwater injected
B) Impose a tax according to the number of earthquakes
C) Pay a subsidy to homeowners whose houses are damaged by earthquakes
D) Pay a subsidy to oil companies to develop an extraction technology that requires less saltwater
Answer: A
Difficulty: Medium
Oklahoma?
10) A Pigouvian tax is a tax designed to ________.

A) induce the consumers of a good to reduce their consumption of the good
B) induce the producers generating negative externalities to reduce production
C) induce the producers generating positive externalities to reduce production
D) force the producers to stop the production of a good in the short run
Answer: B
Difficulty: Easy
Topic: Government Regulation: Market-Based Approaches
37
11) The production of an industrial good in a plant emits harmful gases that cause breathing problems.
Which of the following will happen if the government imposes a Pigouvian tax on the plant?
A) The marginal external cost will increase.
B) The marginal private cost will fall.
C) The quantity supplied of the good will decrease.
D) The demand for the good will increase.
Answer: C
Difficulty: Medium
12) When a Pigouvian tax is imposed, ________.

A) the marginal private cost curve shifts upward
B) the demand curve shifts rightward
C) the marginal social cost curve shifts downward
D) the marginal social benefit curve shifts downward
Answer: A
Difficulty: Medium
13) A steel-producing factory in North Palladia generates large amounts of carbon dioxide during its
production process. A per-unit tax on the production of steel that equals the marginal ________ of steel
production will entirely internalize the externality.
A) private cost
B) social cost
C) external cost
D) external benefit
Answer: C
Difficulty: Medium
14) Most municipalities and states in the northeastern United States use rock salt to "produce" ice-free
roadways in the face of winter snowstorms. But using rock salt has several drawbacks: it speeds up
corrosion of bridges and cars; it can choke vegetation; as runoff, it is harmful to creeks and rivers; and it is
not very effective in de-icing roads at low temperatures. If the marginal private cost of rock salt is $60 per
ton and the marginal external cost of rock salt is $10 per ton, the optimal corrective tax is ________.
A) $10 per ton
B) $50 per ton
C) $60 per ton
D) $70 per ton
Answer: A
Difficulty: Medium
38
15) Smoking increases the risk of lung infections not only for active smokers but also for other people
inhaling the smoke passively. Which of the following will help reduce smoking?
A) A corrective tax
B) Life insurance
C) Health insurance
D) A corrective subsidy
Answer: A
Difficulty: Medium
Scenario: The production of a good creates a negative externality. The following figure shows the market
for this good.
16) Refer to the scenario above. The socially optimal price for this good is ________, while the market
price of it is equal to ________.
A) $14; $10
B) $20; $10
C) $20; $14
D) $14; $20
Answer: C
Difficulty: Medium
39
17) Refer to the scenario above. The socially optimal level of output for this good is ________, while the
market produces ________.
A) Q1; Q2
B) Q1; Q3
C) Q2; Q3
D) Q2; Q1
Answer: A
Difficulty: Medium
18) Refer to the scenario above. To restore the socially optimal outcome in this market, the government
should ________.
A) levy a $6 tax per unit on this good
B) levy a $10 tax per unit on this good
C) pay a $6 subsidy per unit on this good
D) not intervene in the market, as the market will provide the socially optimal outcome by itself
Answer: B
Difficulty: Medium
19) A corrective subsidy induces the ________ toward the socially optimal level.
A) consumers affected by a negative externality to increase the quantity consumed
B) producers creating a negative externality to increase the quantity produced
C) consumers benefiting from a positive externality to increase the quantity consumed
D) producers generating a positive externality to reduce the quantity produced
Answer: C
Difficulty: Easy
20) A Pigouvian subsidy leads to a socially efficient outcome by ________.

A) raising individuals' marginal benefit from consumption
B) lowering firms' marginal private cost of production
C) lowering individuals' marginal benefit from consumption
D) lowering firms' marginal external cost of production
Answer: A
Difficulty: Easy
40
21) Which of the following happens when a Pigouvian subsidy is provided?
A) The marginal social cost curve shifts upward.
B) The marginal private cost curve shifts downward.
C) The marginal social benefit curve shifts downward.
D) The marginal private benefit curve shifts upward.
Answer: D
Difficulty: Easy
22) Which of the following is true?

A) If the consumption of a good gives rise to a positive externality, it can be internalized by taxing the
producers of the good.
B) If the production of a good gives rise to a negative externality, it can be internalized by taxing the
producers of the good.
C) If the production of a good gives rise to a positive externality, it can be internalized by taxing the
consumers of the good.
D) If the consumption of a good gives rise to a negative externality, it can be internalized by subsidizing
the purchase of the good.
Answer: B
Difficulty: Easy
23) A vaccination against a disease helps prevent the spread of the disease. Which of the following can
help increase the number of people vaccinated to the socially optimal level?
A) A corrective subsidy
B) An income tax
C) An insurance policy
D) A health tax
Answer: A
Difficulty: Medium
24) If the consumption of a good involves a positive externality, how can consumers be encouraged to
consume more of the good?
Answer: If the consumption of a good involves a positive externality, the marginal social benefit derived
from the good exceeds the marginal private benefit. However, the consumers of the good do not take this
additional benefit into consideration and continue consuming only as long as the marginal private benefit
from consumption exceeds the marginal private cost. In this case, if the consumption of the good is
subsidized, the marginal private benefit from consumption will increase, causing consumers to consume
more.
Difficulty: Medium
41
25) What is a Pigouvian tax?
Answer: A Pigouvian tax, or a corrective tax, is a tax designed to induce producers of a negative
externality to reduce production to the socially optimal level.
Difficulty: Easy
26) If the production of a chemical in a factory releases a harmful gas, how can the government maximize
social well-being in the economy?
Answer: The production of the chemical generates negative externalities because it imposes an
additional cost on the society. As a result, the marginal social cost of producing each unit of output is
higher than the marginal private cost. In the figure below, the marginal social cost curve (MSC) denotes
the higher cost of producing each unit of output.
According to the figure, social well-being is maximized if Q2 units of the chemical are traded in the
market. The factory, however, will continue production until the marginal private benefit of producing a
unit of the chemical equals the marginal private cost of producing it, not the marginal social cost.
Therefore, Q1 units of the chemical are sold in the free market.
If a per-unit tax equal to the marginal external cost of production is imposed on chemical production, the
marginal private cost of production will become equal to the marginal social cost. The marginal private
cost curve (S = MPC) will shift to the left and will coincide with the marginal social cost curve (MSC). As
a result, the factory will now produce Q2 units of the chemical, and social well-being will be maximized.
Difficulty: Medium
27) Efficient government intervention requires that ________.

A) the costs of government enforcement be zero
B) the marginal benefits of intervention be equal to the marginal costs of intervention
C) intervention should continue until all negative externalities have been eliminated
D) there be no productivity losses in the private sector as a result of government intervention
Answer: B
Difficulty: Easy
42
28) In practice, assessing the benefits and costs of a proposed government program is difficult because
________.
A) the effects of the program may be difficult to determine
B) many benefits and costs occur in the distant future
C) some costs and benefits are difficult, perhaps impossible to quantify
D) all of the above
Answer: D
Difficulty: Easy
29) It is inefficient for the government to charge a price for consuming a good, such as weather forecasts,
because ________.
A) too many forecasts will be produced
B) the price cannot be set to cover all research costs
C) no one will be willing to pay for these forecasts
D) the marginal cost of providing this information to another consumer is zero
Answer: D
Difficulty: Easy
30) A Pigouvian tax is also called a(n) ________.

A) subjective tax
B) objective tax
C) corrective tax
D) subsidy
Answer: A
Difficulty: Easy
31) If the government taxed away all profits in a market economy, the likely result would be ________.
A) a more rapid shift of resources to expanding industries
B) the removal of the incentive for resource allocation
C) improved market signals and responses
D) enhanced efficiency in resource allocation
Answer: B
Difficulty: Medium
43
32) Suppose the federal government implements a system of tradeable permits that lets power plants buy
and sell the right to emit sulfur dioxide. This is an example of ________.
A) the Coase Theorem
B) a market-based regulatory approach
C) a Pigovian corrective tax
D) a Pigovian corrective subsidy
Answer: B
Difficulty: Medium
Scenario: Currently, major corn-growing states, such as Iowa, use large amounts of nitrogen-based
fertilizers. Many of Iowa's corn-growing regions are characterized by karst topography (water erodes the
limestone bedrock and forms sinkholes, caves, and underground streams). In karst landscapes, runoff
from corn fields contains high levels of nitrogen in the form of nitrates, which can pollute private and
municipal water wells. Suppose the demand and supply for corn are:
Corn Demand: QD = 70 - 5p,

Corn Supply: QS = 10p - 5,
where quantity is millions of bushels of corn and price is dollars per bushel. The marginal private benefit
of corn and the marginal private cost of corn production can be derived by rewriting demand and supply
with price as a function of quantity:
Inverse Demand: p = 14 - 0.2Q

Marginal Private Benefit: MPB = 14 - 0.2Q
Inverse Supply: p = 0.1Q + 0.5
Marginal Private Cost: MPC = 0.1Q + 0.5
Suppose the marginal external cost (MEC) of nitrogen fertilizer use in corn growing is a constant $1.50
per bushel, so MEC = 1.5. The marginal social cost (MSC) is:
MSC = MPC + MEC = 0.1Q + 0.5 + 1.5

MSC = 0.1Q + 2
44
The figure below shows these marginal benefits and marginal costs.
33) Refer to the scenario above. The private market equilibrium price is ________ per bushel, and the
private market equilibrium quantity is ________ bushels.
A) $4; 50 million
B) $5; 40 million
C) $5; 45 million
D) $6; 40 million
Answer: C
Difficulty: Hard
34) Refer to the scenario above. The social optimum occurs at a price of ________ per bushel and a
quantity of ________ bushels.
A) $4; 35 million
B) $5; 30 million
C) $5; 45 million
D) $6; 40 million
Answer: D
Difficulty: Hard
45
35) Refer to the scenario above. The optimal corrective ________ is ________ per bushel. Explain your
answer.
A) subsidy; $1.50
B) tax; $1.50
C) tax; $4.50
D) tax; $6.00
Answer: B
Explanation: Set the Pigovian corrective tax = MEC at social optimum = $1.50 per bushel.
Difficulty: Medium
36) Refer to the figure below. The deadweight loss arising in the private market equilibrium is area
________ and is equal to ________.
A) A; $60 million
B) B; $3.75 million
C) C; $3.75 million
D) D; $23.75 million
Answer: B
Difficulty: Hard
46
37) Pay-As-You-Throw programs that charge people a small price for each bag of trash they throw out are
likely to ________.
A) increase waste creation
B) increase recycling and reuse
C) increase the social cost of waste disposal
D) reduce social surplus
Answer: B
Difficulty: Easy
Topic: Letting the Data Speak: Pay As You Throw
9.4 Public Goods
1) Private goods are ________.

A) excludable but non-rival in consumption
B) non-excludable and non-rival in consumption
C) non-excludable but rival in consumption
D) excludable and rival in consumption
Answer: D
Difficulty: Easy
Topic: Public Goods
2) If a good is excludable, ________.

A) one person's use of the good reduces the amount of the good available to others
B) people can be prevented from using the good
C) more than one person cannot use the good at the same time
D) several people can use the good simultaneously
Answer: B
Difficulty: Easy
Topic: Public Goods
3) A good is non-rival in consumption if ________.

A) one person's use of the good does not preclude consumption by others
B) the government can regulate its production
C) people cannot be prevented from using it
D) the demand for the good increases with an increase in the consumer's income
Answer: A
Difficulty: Easy
Topic: Public Goods
47
4) Public goods are ________ in consumption.
A) excludable but non-rival
B) non-excludable and non-rival
C) rival but non-excludable
D) excludable and rival
Answer: B
Difficulty: Easy
Topic: Public Goods
5) Which of the following is an example of an ordinary private good?

A) Furniture
B) The Internet
C) Water
D) Cable TV
Answer: A
Difficulty: Easy
Topic: Public Goods
6) Which of the following is an example of a public good?

A) National defense
B) Natural forests
C) Music downloads
D) Designer clothes
Answer: A
Difficulty: Easy
Topic: Public Goods
7) ________ are highly excludable but non-rival in consumption.

A) Public goods
B) Private goods
C) Common pool resource goods
D) Club goods
Answer: D
Difficulty: Easy
Topic: Public Goods
8) ________ are non-excludable but rival in consumption.

A) Public goods
B) Private goods
C) Common pool resource goods
D) Club goods
Answer: C
Difficulty: Easy
Topic: Public Goods
48
9) ________ are non-excludable in consumption.
A) Public goods and private goods
B) Public goods and common pool resource goods
C) Private goods and club goods
D) Club goods and common pool resource goods
Answer: B
Difficulty: Easy
Topic: Public Goods
10) ________ are non-rival in consumption.

A) Public goods and private goods
B) Public goods and club goods
C) Public goods and common pool resource goods
D) Private goods and common pool resource goods
Answer: B
Difficulty: Easy
Topic: Public Goods
11) An online newspaper is an example of a(n) ________.

A) ordinary private good
B) common pool resource
C) public good
D) club good
Answer: D
Difficulty: Easy
Topic: Public Goods
12) ________ is an example of a common pool resource good.

A) Food
B) Water
C) National defense
D) Wi-Fi
Answer: B
Difficulty: Easy
Topic: Public Goods
13) Which of the following is an example of a club good?

A) Streetlights
B) A diamond ring
C) Forests
D) Cable TV
Answer: D
Difficulty: Easy
Topic: Public Goods
49
14) A concert in a crowded auditorium is ________ in consumption.
A) non-excludable and non-rival
B) excludable but non-rival
C) excludable and rival
D) non-excludable but rival
Answer: C
Difficulty: Medium
Topic: Public Goods
15) Rides in a public park are ________ in consumption.

A) non-excludable and non-rival
B) excludable but non-rival
C) excludable and rival
Answer: D
Difficulty: Medium
Topic: Public Goods
16) The view of a spectacular sunset on a beach is a(n) ________.

A) rival and excludable good
B) excludable good
C) non-rival good
D) rival but non-excludable good
Answer: C
Difficulty: Easy
Topic: Public Goods
17) Suppose your roommate approaches you and asks if you would like to split the cable bill for your
apartment. You decline, citing that you are not home often and are more likely to stream content on your
laptop. Your roommate purchases a deluxe cable package, and you frequently watch programs on the
television in your apartment. This is an example of a ________.
A) common pool resource
B) club good
C) free-rider problem
D) government provision
Answer: C
Difficulty: Easy
Topic: Public Goods
50
18) Most of the goods produced in an economy are ________.
A) private goods
B) public goods
C) club goods
D) inferior goods
Answer: A
Difficulty: Easy
Topic: Public Goods
19) Which of the following is an example of a public good?

A) A house in a tourist destination
B) A training program for a company's employees
C) A radio broadcast
D) A magazine subscription
Answer: C
Difficulty: Medium
Topic: Public Goods
20) Which of the following goods is rival in consumption and is also excludable?
A) A fireworks display
B) A movie shown on cable television
C) A DVD
D) A magic show in a public park
Answer: C
Difficulty: Easy
Topic: Public Goods
21) A room heater is a ________.

A) club good because it is excludable but non-rival in consumption
B) club good because it is non-excludable but rival in consumption
C) public good because it is non-excludable and non-rival in consumption
D) private good because it is excludable and rival in consumption
Answer: D
Difficulty: Hard
Topic: Public Goods
22) A street light is a ________.

A) private good
B) public good
C) common pool resource good
D) club good
Answer: B
Difficulty: Medium
Topic: Public Goods
51
23) Pay-per-view broadcasts are ________.
A) public goods
B) private goods
C) club goods
D) common pool resource goods
Answer: C
Difficulty: Medium
Topic: Public Goods
24) A congested street is ________ in consumption.

A) excludable and rival
B) non-excludable but rival
C) excludable but non-rival
D) non-excludable and non-rival
Answer: B
Difficulty: Medium
Topic: Public Goods
25) ________ occurs when an individual has no incentive to pay for a good because failure to pay does not
prevent consumption.
A) A free-rider problem
B) The paradox of thrift
C) A tragedy of the commons
D) The paradox of plenty
Answer: A
Difficulty: Easy
Topic: Public Goods
26) Which of the following correctly completes the following table?
High Excludability Low Excludability

High Rivalry x y
Low Rivalry z w
A) x = Public Good; y = Private Good; z = Common Pool Resource; w = Club Good

B) x = Private Good; y = Public Good; z = Club Good; w = Common Pool Resource
C) x = Public Good; y = Common Pool Resource; z = Private Good; w = Club Good
D) x = Private Good; y = Common Pool Resource; z = Club Good; w = Public Good
Answer: D
Difficulty: Medium
Topic: Public Goods
52
27) A free rider is a person who ________.
A) can produce a good at a very low cost
B) only consumes products provided by the government
C) receives the benefit of a good without paying for it
D) purchases products available for discounts
Answer: C
Difficulty: Easy
Topic: Public Goods
28) The free-rider problem exists for goods that are ________.
A) excludable
B) rival
C) free
D) non-excludable
Answer: D
Difficulty: Easy
Topic: Public Goods
29) The free-rider problem may arise in the case of ________.

A) public goods
B) private goods
C) club goods
D) inferior goods
Answer: A
Difficulty: Easy
Topic: Public Goods
30) Which of the following is likely to have a free-rider problem?

A) On-the-job training programs
B) Environmental protection programs
C) Movie DVDs
D) Mobile phones
Answer: B
Difficulty: Easy
Topic: Public Goods
53
31) Rural/Metro–a private, subscription-based fire protection and emergency service provider–was
founded by Lou Witzeman in 1948. Witzeman lived in an unincorporated suburb of Phoenix that did not
provide fire-fighting services. Witzeman canvassed his neighbors and found that nearly all of them
promised to pay him $10/year to provide fire protection. After investing his last $900 in a truck and
firefighting equipment, most of his neighbors refused to pay him. This is an example of a ________.
A) government provision
B) free-rider problem
C) common pool resource
D) club good
Answer: B
Difficulty: Medium
Topic: Public Goods
32) Four roommates have moved into an apartment. However, none of them clean the apartment,
thinking that the others will do it. This is an example of ________.
A) the free-rider problem
B) the paradox of thrift
C) the paradox of plenty
D) the tragedy of commons
Answer: A
Difficulty: Hard
Topic: Public Goods
33) You bought a subscription for an online magazine and shared your log-in details with a friend. Your
friend is a ________ in this case.
A) free-rider
B) rent seeker
C) speculator
D) hedger
Answer: A
Difficulty: Easy
Topic: Public Goods
34) The local community in a town has arranged for a fireworks show in a park located in the center of
town. The cost of the ticket to watch the show is $5. However, only 40 percent of the tickets are sold, as
spectators can watch the show without entering the park. This is an example of ________.
A) the free-rider problem
B) the paradox of thrift
C) the paradox of plenty
D) the tragedy of the commons
Answer: A
Difficulty: Medium
Topic: Public Goods
54
35) The citizens of a country often refuse to pay voluntarily for national defense because ________.
A) national defense is a common pool resource
B) nobody can be excluded from being defended by the state
C) all citizens do not derive equal satisfaction from national defense
D) national defense is rival in consumption
Answer: B
Difficulty: Medium
Topic: Public Goods
Scenario: Suppose there are only three houses on a street. The following table shows each homeowner's
willingness to pay for street lights. It costs $700 to install a street light.
Homeowner 1's Homeowner 2's Homeowner 3's

Willingness Willingness Willingness
to Pay to Pay to Pay
First street light $400 $300 $710
Second street light $350 $200 $300
Third street light $200 $110 $100
Fourth street light $100 $30 $40
36) Refer to the scenario above. The socially optimal number of street lights for this street is ________.
A) 0
B) 1
C) 2
D) 3
Answer: C
Difficulty: Hard
Topic: Public Goods
37) Refer to the scenario above. If each homeowners on this street is left to purchase streetlights
independently, then Homeowner 1 would purchase ________, Homeowner 2 would purchase ________,
and Homeowner 3 would purchase ________ streetlight(s).
A) 1; 0; 2
B) 1; 1; 2
C) 0; 0; 2
D) 0; 0; 1
Answer: D
Difficulty: Hard
Topic: Public Goods
55
38) Alex is a non-union employee in a steel factory in the southern district of Berylia. The union workers
of the factory are able to negotiate certain benefits for the employees. Alex enjoys all the benefits, even
though he does not pay the union fee. This is an example of ________ behavior.
A) rent-seeking
B) free-riding
C) profit-maximizing
D) rationally ignorant
Answer: B
Difficulty: Hard
Topic: Public Goods
39) Why are public goods non-rival in consumption? Explain with a real-world example.
Answer: A public good like national defense is non-rival in consumption. This is because the enjoyment
of national security by a citizen of a country does not reduce the level of security enjoyed by others.
Difficulty: Medium
Topic: Public Goods
40) What is the difference between club goods and common pool resource goods? Give one example of
each type of good.
Answer: Club goods are highly excludable but non-rival in consumption, while common pool resources
are non-excludable but rival in consumption. One example of a club good is a pay-per-download Web
site, and an example of a common pool resource is a natural lake.
Difficulty: Easy
Topic: Public Goods
41) Why do people refuse to pay for public goods?

Answer: People often refuse to pay for public goods because these goods are non-excludable and non-
rival in consumption. A person can enjoy a public good without paying for it because nobody can be
excluded from its consumption and consumption by one individual does not reduce the amount available
for consumption by others.
Difficulty: Medium
Topic: Public Goods
42) How is the market demand curve for a public good derived?
Answer: The market demand curve for public goods is derived by the vertical summation of the
demand curves of consumers. Adding the individual demand curves vertically gives the measure of the
amount of money consumers are willing to pay for each level of the public good.
Difficulty: Easy
Topic: Public Goods
56
43) Classify each of the following goods on the basis of the characteristics of excludability and rivalry in
consumption, giving appropriate reasons.
a) A lighthouse
b) A pair of shoes
c) A paid Web site
d) A congested non-toll road
Answer:
a) A lighthouse is non-excludable in consumption, because nobody can be prevented from using it. It is
also non-rival in consumption, because its use by one person will not reduce the quantity available to
others.
b) A pair of shoes is excludable in consumption, because people who do not pay for it can be prevented
from using it. It is also rival in consumption, because it can be used by only one person at a time.
c) A paid Web site is excludable but non-rival in consumption, because people who do not pay for its use
can be prevented from using it, but its use by one person will not restrict its use by others.
d) A congested road is non-excludable but rival in consumption, because even though nobody can be
excluded from its use, its use by one individual will reduce the space available for others.
Difficulty: Easy
Topic: Public Goods
44) An environmental awareness program was launched in a certain community, and all residents in the
community were asked to contribute to its functioning. After a month, the program had to be
discontinued due to a lack of funds. Why did the program not receive sufficient funds? Explain your
answer.
Answer: A community program, such as the one mentioned here, is an example of a public good. Like
all public goods, it is non-excludable and non-rival in consumption. None of the residents in the
community can be prevented from enjoying the benefits of the program, and the enjoyment of its benefits
by one individual does not reduce the amount enjoyed by others. Because nobody can be excluded from
its consumption, people can enjoy the benefits of the program without paying for it. Therefore, nobody in
the community had an incentive to contribute to its functioning. As a result, the program had to be
discontinued due to a lack of funds. This is an example of the free-rider problem in the consumption of
public goods.
Difficulty: Medium
Topic: Public Goods
57
Scenario: Frank and Nancy live in a small community on Cape Cod in Massachusetts. For simplicity,
assume Frank and Nancy are the only individuals in the community. Each has a demand for mosquito
control, given by the following table, equations, and figure. Assume that mosquito control is a public
good. Mosquito control is provided at a constant marginal cost of $120.
Frank's demand: qFrank = 200 - p,

Frank's inverse demand = (Marginal Private Benefit): p = 200 - q,
Nancy's demand: qNancy = 100 - p,
Nancy's inverse demand = (Marginal Private Benefit): p = 100 - q,
58
45) Refer to the scenario above. In the private market equilibrium, what are the quantities demanded of
mosquito control for Frank and Nancy? Explain your answer.
A) 0 units for Frank, 0 units for Nancy
B) 80 units for Frank, 0 units for Nancy
C) 80 units for Frank, 10 unit for Nancy
D) 120 unit for Frank, 20 unit for Nancy
Answer: B
Explanation: Frank demands 80 units of mosquito control (where his marginal private benefit equals
marginal cost), and Nancy demands 0 units of mosquito control. Nancy is able to free-ride on Frank's
provision, so she enjoys the benefits of 80 units of mosquito control as well. This results in
underprovision relative to the social optimum.
Difficulty: Hard
Topic: Public Goods
59
46) Refer to the scenario above. Now suppose that mosquito control will be publicly provided. What is
the market equilibrium quantity of mosquito control services provided? Explain your answer graphically.
A) 0 units
B) 80 units
C) 90 units
D) 120 units
Answer: C
Explanation: The following figure graphs the answer.
Difficulty: Hard
AACSB: Analytical Thinking, Application of Knowledge
Topic: Public Goods
60
The following figure depicts the demand of Ann, the demand of Bob, and the market demand for Good
X. Assume that all demands are linear.
47) Refer to the figure above. If Good X is a private good, what is the market price when the total quantity
demanded on the market is 3?
A) $8
B) $14
C) $12
D) $10
Answer: D
Difficulty: Hard
Topic: Public Goods
48) Refer to the figure above. If Good X is a private good, what is the total quantity demanded on the
market if the market price is $4?
A) 8
B) 14
C) 12
D) 10
Answer: C
Difficulty: Hard
Topic: Public Goods
49) Refer to the figure above. If Good X is a public good, what is the market price when the total quantity
demanded on the market is 3?
A) $8
B) $14
C) $12
D) $10
Answer: B
Difficulty: Hard
Topic: Public Goods
61
50) Refer to the figure above. If Good X is a public good, what is the total quantity demanded on the
market if the market price is $4?
A) 8
B) 14
C) 12
D) 10
Answer: A
Difficulty: Hard
Topic: Public Goods
51) To avoid inefficient exclusion, the government often provides for free ________ but ________ goods
and services.
A) rivalrous; excludable
B) non-rivalrous; excludable
C) rivalrous; non-excludable
D) non-rivalrous; non-excludable
Answer: B
Difficulty: Medium
Topic: Public Goods
52) Suppose Phillip and Mathew are the only tenants in a building. The owner of the building is
considering installing surveillance cameras in the building. The following table shows the amount that
Phillip and Mathew are willing to pay for each additional camera.
Number of Surveillance Phillip's Willingness Mathew's Willingness

Cameras to Pay to Pay
1 $400 $300
2 $310 $200
3 $210 $110
4 $80 $30
If the cost of installing each surveillance camera is $320, how many cameras will the owner of the
building install?
Answer: The owner of the building will continue installing cameras until the marginal cost of installing
an additional camera equals the marginal benefit from its installation. The marginal benefit from the
installation of a camera can be estimated from the total willingness to pay for an additional camera. Thus,
the owner will continue installing cameras as long as the total willingness to pay for a camera exceeds the
marginal cost. The total willingness to pay for the first surveillance camera is $400 + $300, or $700, which
exceeds the marginal cost of $320. Therefore, the first camera will be installed. The total willingness to
pay for the second camera is $310 + $200, or $510. Therefore, the second camera will also be installed. The
total willingness to pay for the third camera is $210 + $110, or $320, which equals the marginal cost.
Therefore, the third camera will also be installed. Because the total willingness to pay for the fourth
camera is lower than the marginal cost, only three cameras will be installed.
Difficulty: Hard
Topic: Public Goods
62
Scenario: Jim and Jane are the only residents of an apartment building. The figures below show their
demand curves for security guards (in hours of duty per day) who staff the entrance to the apartment. To
answer some of the questions below, it will be useful to find the equations of the two lines in the figure.
53) Refer to the scenario above. To construct the market (Jim and Jane) demand curve for security guards,
you must add the two curves ________, since security guard's service is ________.
A) horizontally; a rival good and exclusive
B) horizontally; a rival good but non-exclusive
C) vertically; exclusive but non-rival
D) vertically; non-rival and non-exclusive
Answer: D
Difficulty: Medium
Topic: Public Goods
54) Refer to the figure above. What is the maximum amount of money Jim and Jane together would pay
to have 24 hours of security guards' presence?
A) $32.50 per hour
B) $28.75 per hour
C) $16.50 per hour
D) $10.00 per hour
Answer: D
Difficulty: Medium
Topic: Public Goods
63
55) Refer to the figure above. What is the maximum amount of money Jim and Jane together would pay
to have 15 hours of security guards' presence?
A) $32.50 per hour
B) $28.75 per hour
C) $16.50 per hour
D) $10.00 per hour
Answer: A
Difficulty: Medium
Topic: Public Goods
56) Refer to the figure above. If the price of security guards' time is $40 per hour, how many hours of
guards' time would be demanded?
A) 18 hours
B) 12 hours
C) 9 hours
D) 4 hours
Answer: B
Difficulty: Medium
Topic: Public Goods
57) Refer to the figure above. If the market supply of guards' time is as in the figure below, what is the
optimal number of guard's time for Jim and Jane?
A) 18 hours
B) 12 hours
C) 9 hours
D) 4 hours
Answer: B
Difficulty: Medium
Topic: Public Goods
64
58) Five players are given $10 each and asked to contribute a portion of it to the sports development fund.
They are told that the total collection will be doubled and distributed equally among each of them. In this
case, the players are likely to contribute ________.
A) $5 each
B) $10 each
C) $1 each
D) nothing
Answer: D
Difficulty: Easy
Topic: Choice and Consequence: The Free-Rider's Dilemma
59) To derive the market demand for a public good, ________.

A) horizontally sum individual demands
B) vertically sum individual demands
C) horizontally sum individual firm marginal cost curves
D) vertically sum individual firm marginal cost curves
Answer: B
Difficulty: Medium
Topic: Government Provision of Public Goods
60) A video available on a Web site that allows free download is a ________.
A) private good
B) public good
C) club good
D) common pool resource
Answer: B
Difficulty: Easy
61) The government should provide an additional unit of a public good if ________.
A) the marginal cost of providing the additional unit of the good equals the social cost of providing the
additional unit
B) the marginal cost of providing the additional unit of the good exceeds the marginal benefit
C) the marginal benefit exceeds the marginal cost of providing the additional unit of the good
D) the marginal cost of providing the additional unit of the good exceeds the average cost of providing
the additional unit
Answer: C
Difficulty: Easy
65
62) Which of the following is true?
A) The market demand curve for a public good is always perfectly elastic.
B) The market demand curve for a private good has a positive slope.
C) The market demand curve for a public good is obtained by the horizontal summation of individual
demand curves.
D) The market demand curve for a public good is obtained by the vertical summation of individual
demand curves.
Answer: D
Difficulty: Easy
63) Tom is willing to contribute $400 toward building a public park, Jack is willing to contribute $500, and
Joe is willing to contribute $750. What is the total value of the park if Tom, Jack, and Joe are the only
residents in the neighborhood where the park is being built?
A) $1,650
B) $1,050
C) $3,300
D) $2,350
Answer: A
Difficulty: Medium
64) The total willingness to pay for public restrooms in a city is given in the table below.
Number of Restrooms Total Willingness to Pay

1 $208,000
2 $199,000
3 $150,000
4 $85,000
If the marginal cost of building a public restroom is $208,000, how many restrooms will be built?
A) 1
B) 2
C) 3
D) 4
Answer: A
Difficulty: Easy
66
65) Four friends decide to have a party every Saturday. They decide to pool the money to spend on the
parties. The table below shows the maximum amount each friend is willing to contribute to each party.
Number of parties Peter Mary Kate Jacob

First party $250 $340 $120 $215
Second party $200 $270 $100 $160
Third party $135 $80 $70 $100
Fourth party $60 $100 $25 $40
If the cost of each party is $225, how many parties should they have to maximize total surplus?
A) 1
B) 2
C) 3
D) 4
Answer: D
Difficulty: Medium
9.5 Common Pool Resource Goods
1) Suppose you live in a housing co-op with eleven other college students. The kitchen is constantly a
mess; virtually nobody in the house cleans up, and the sink is overflowing with dirty dishes. This is an
example of ________.
A) a private good
B) a private provision
C) a club good
D) the tragedy of the commons
Answer: D
Difficulty: Medium
Topic: Common Pool Resource Goods
2) The tragedy of the commons occurs because some goods are ________ in consumption.
A) excludable
B) non-excludable but rival
C) non-rival and non-excludable
D) non-rival
Answer: B
Difficulty: Medium
67
3) Which of the following can result in the tragedy of the commons?
A) The use of common pool resources above the socially optimal level
B) A low level of satisfaction derived from the use of common pool resources
C) A high rate of taxation on common pool resources
D) The tendency of consumers to use common pool resources without paying for them
Answer: A
Difficulty: Easy
4) Overfishing leading to a rapid depletion of the stock of fish is an example of the ________.
A) tragedy of the commons
C) paradox of thrift
D) prisoners' dilemma
Answer: A
Difficulty: Medium
5) Electricity generated from coal-burning plants is relatively cheap, but the plants contribute to global
warming due to their high level CO2 emissions. The negotiations between developed and developing
countries to cut back on coal electricity has failed in the past. This is an example of the ________.
Answer: A
Difficulty: Medium
6) A retired athlete built a gym near her house that could be used for free by all the residents in the
neighborhood. However, the overuse of the facilities soon led to irreparable damages. This is an example
of the ________.
B) pecuniary externality
Answer: A
Difficulty: Medium
68
7) What causes the overexploitation and depletion of common pool resource goods?
Answer: Common pool resources are overexploited because these resources are non-excludable in
consumption. However, these goods are rival in consumption. Therefore, the overexploitation of these
resources leads to their depletion.
Difficulty: Medium
8) Free access and unrestricted mining of iron ore led to the depletion of the iron ore deposits in
Rockland. As a result, several economic activities were adversely affected. What caused the
overexploitation of these resources when their conservation could have benefited the consumers in the
economy?
Answer: Common pool resources, such as free-access mines, are non-excludable but rival in
consumption. The consumption of such goods gives rise to a negative externality. Each individual, while
consuming the goods, only considers his or her own cost of using the good without realizing that this use
of the good reduces the amount available to others. This leads to an overexploitation and depletion of
these resources. This phenomenon is called the tragedy of the commons and explains the depletion of the
iron ore deposits in Rockland.
Difficulty: Medium
Scenario: The following excerpt is from Michael A. McPherson and Michael L. Nieswiadomy, "African
Elephants: The Effects of Property Rights and Political Stability," Contemporary Economic Policy 18, no. 1
(2007).
African elephant populations have declined by more than 50% over the past 20 years. International
outrage over the slaughter led to a worldwide ban on ivory sales beginning in 1989, despite the objections
of many economists and scientists, and of several southern African countries that have established
systems of property rights over elephants. Far from declining, elephant populations in many of these
countries have increased to levels at or above the carrying capacity of the ecosystem. This article
estimates the determinants of changes in elephant populations in 35 African countries over several time
periods. The authors find that, controlling for other factors, countries with property rights systems or
community wildlife programs have more rapid elephant population growth rates than do those countries
that do not. Political instability and the absence of representative governments significantly lower
elephant growth rates.
9) Refer to the scenario above. Which of the following is consistent with a solution to the elephant
population decline described in the quote?
A) Assigning the property rights creates an incentive for owners to manage the resource so it is not
depleted.
B) Banning the trade of a declining resource is an effective way of managing it.
C) Government ownership of a declining resource protects it from depletion.
D) There is no effective solution to management of common pool resources.
Answer: A
Difficulty: Easy
69
10) Refer to the scenario above. Which of the following is consistent with a solution to the elephant
population decline described in the quote?
A) Political instability is the main cause of decline in common pool resources.
B) Prohibition of trade of some resources is necessary even when property rights for them are well
established.
C) Property rights could alleviate tragedy of commons problems in the absence of representative
government.
D) Property rights without an authority to enforce it may be ineffective.
Answer: D
Difficulty: Medium
11) Which of the following is NOT an example of the tragedy of the commons?
A) Extracting water extraction from aquifers
B) Cutting trees on public land
C) Fishing on a private lake
D) Eating from the office donut box
Answer: C
Difficulty: Medium
12) The poaching of African elephants for their tusks is a serious problem facing many African nations.
One solution is to establish large fenced-in "parks," where elephants are ranched similar to beef cattle on
ranches in the western United States. Maintaining elephant herds in large enclosed park-like areas solves
the problem of ________.
A) low excludability
B) non-rivalness in consumption
C) public provision
D) the free rider
Answer: D
Difficulty: Medium
13) Your roommate claims we can understand the near-extinction of the American bison during the latter
half of the nineteenth century in America as an economic phenomenon. Since bison herds were ________
"owned," they were a ________, and buffalo hunters generated a ________ externality when hunting
them, as the hunters failed to consider how overharvesting could reduce herd numbers in the future.
A) publicly; common resource pool good; negative
B) publicly; club good; negative
C) privately; common resource pool good; positive
D) privately; club good; negative
Answer: A
Difficulty: Medium
70
14) A green pasture has turned barren due to overgrazing. This has happened because the pasture was
________.
A) excludable and rival
B) non-excludable and non-rival
C) excludable but non-rival
Answer: D
Difficulty: Easy
Topic: Choice and Consequence: Tragedy of the Commons
15) Which of the following is NOT a solution to the tragedy of the commons?
A) levying a tax on the use of the common resource
B) privatizing the common resource
C) ration the use of the common resource
D) granting a subsidy of the use of the common resource
Answer: D
Difficulty: Easy
Topic: Choice and Consequence: Tragedy of the Commons
16) The solution to the "tragedy of the commons" in street traffic congestions in London was ________.
A) to run an advertise campaign to persuade drivers to use other routes
B) to let the market solve the problem by itself
C) to build a new highways
D) to levy a toll on the highway use
Answer: D
Difficulty: Easy
Topic: EBE: How Can the Queen of England Lower Her Commute Time to Wembley Stadium?
17) The congestion charge is an example of ________ to the negative externality associated with common
pool resources.
A) a command-and-control government solution
B) a market-based government solution
C) a social norm solution
D) a private bargaining solution
Answer: B
Difficulty: Easy
Topic: Evidence-Based Economics: How Can the Queen of England Lower Her Commute Time to Wembley
Stadium?
71
18) What constitutes evidence for the efficacy of the congestion charge described in the text?
A) The total emission from vehicles in the regulated area of London declined after the introduction of the
congestion charge.
B) The distance traveled by all private vehicles in the regulated area of London declined after the
introduction of the congestion charge, while more distance was traveled by public transportation.
C) The distance traveled by private vehicles in the regulated area of London declined after the
introduction of the congestion charge, while more distance was traveled by high-occupancy vehicles and
low-emission vehicles.
D) The revenue to the city government of London has dramatically increased.
Answer: C
Difficulty: Easy
Topic: Evidence-Based Economics: How Can the Queen of England Lower Her Commute Time to Wembley
Stadium?
72
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The next door leads to San Carlos, the National Art Gallery. Here are the famous paintings
of “Padre Los Casas,” “The Deluge,” and Murillo’s “San Juan de Dios” and “The Lost Sheep.”
In the fourth and fifth salons are the works of native Mexicans, and their love to old Spain is
shown by their paintings; whole sides of the salons are given to the cruel tale of the Conquest
and the Inquisition: Spanish Cavaliers, holding up the cross in one hand and the drawn sword
in the other, and cutting down the ignorant natives who would not confess the Virgin; the death
of Montezuma, surrounded by heaps of gold so gluttonously hoarded by the Spaniards; the fate
of his brother, Guatemotzin, the last of the Aztec chieftains, whose feet are held in the fire by
his Christian torturers, to disclose his hidden treasures, and the haughty chieftain still kept his
heroic mien without a murmur.
One of his generals who was similarly tortured appealed to him. Turning a look of scorn
upon him Guatemotzin replied: “And say, am I on a bed of roses?” There is a weird fascination
about the paintings that makes you feel that the paintings have just stepped from the pages of
Prescott’s Conquest of Mexico. It is the Chamber of Horrors where the Spanish Inquisition is
depicted by men who knew. Overhead are scores of medallions of famous men of Mexican
birth, and beneath each a famous picture. Leaving this salon we come to a well lighted hall
with several hundred easels and folding stools. This is the instruction room, and is filled with
students and models and casts and charts, where lessons are given to all who apply without
regard to creed or race or color. The Color Line has no place in Mexico. Beneath the salon are
halls filled with statuary, where clay modeling and sculpture is taught, and as you leave with
weary limb you are convinced that it is in truth a National Academy.
Then there is the Mineria, the School of Engineering and Mines, on San Andres and
Betlemita streets. It cost a million and a half of dollars, and was the work of the sculptor and
architect, Tolsa. It contains rich collections of geological and minerological specimens, and a
meteorological observatory, also a fossil of the Pleiocene horse of three toes. The mint on
Apartado Street struck its first coin in 1535, and since then the coins of republics, empires and
dictatorships have run from it in a constant stream of gold and silver to the enormous sum of
$2,200,000,000.
Then there is the National Library and the Preparatory School on San Ildefonso Street, with
a thousand students and fine equipment and botanical garden. Public instruction is free and
gratuitous in every respect, without regard to race or religion.
Just beyond the Cathedral is a National Pawnshop, Monte de Piedad, “Mountain of Mercy.”
It was founded more than a hundred years ago by Count Regla, the owner of the famous silver-
mine of Real de Monte, who gave three hundred thousand dollars for the purpose, so that the
poor and needy could get money on their belongings at reasonable interest. Any article
deposited is valued by two disinterested parties, and three-fourths of its value is promptly
advanced. If the party ceases to pay interest on the loan, the article is kept six months longer,
and then exposed for sale. If not sold in the next six months, it is sold at public auction, and all
that is realized from the sale above the original pawn, is placed to the borrower’s credit. If this
money is not called for in a specified time, it reverts to the bank of the institution. This is a
government institution, and has entirely broken up the small pawn-shops that charge
unreasonable interest. The rate of interest is never raised, and it lends a million dollars a year,
and has fifty thousand customers. One dollar is the smallest sum loaned, and ten thousand the
largest, and the loans are about three hundred daily. About one-third of the articles pawned are
never redeemed, and tourists can find some wonderful bargains here. The Diamond snuff-box
presented Santa Anna when he was Dictator is here. $25,000 will buy the little trifle.
In all the wars and revolutions this old city has seen, all parties have respected this grand
institution, with one exception: When Gonzales was president in 1884, he ran so short of
money, that to keep the National credit, he levied upon its treasury. An English syndicate with a
capital of $25,000,000 has recently bought the institution for one million, and will still carry on
the banking business.
Chapultepec, “The hill of the Grass-hopper,” is the president’s White House and the West
Point of Mexico. It is three miles from the city, and is situated upon a perpendicular rock, two
hundred feet high, and was a veritable Gibraltar in war times when cannon were unknown.
This castle was the pride and ambition of Carlotta, the wife of Maximilian, and she spent half a
million dollars on the interior furnishings. The interior is remodeled on the Pompeiian style.
The castle is reached by a winding road around the hill, and also by a secret cavern through the
hill. On the rock in front are the engraved pictures of Montezuma I. and his successor. In the
rear is the immense park of ahuehuete or cypress trees, next in size to the redwoods of
California. One of these venerable monarchs is fifty feet in circumference and one hundred and
seventy feet high, under which was Montezuma’s favorite seat. This park measures two miles
in length, and reaches to Molino del Rey, “The King’s Mill,” which figured in the war with the
United States. It is now the National Arsenal.
The Military Academy is at Chapultepec, and the whole hill is a military camp. From the
citadel a view can be had of the whole valley of Mexico, forty miles long and thirty wide. To
the left of the road leading up to the castle is a cave, closed with an iron gate. This is said to
have been the treasure house of both Montezuma and Cortez. A stairway leads up through the
hill to the castle. A large collection of animals are in the park and a beautiful flower garden.
From here leads an aqueduct that supplies the city with water, just as it did before the
Conquest. Here was made the last stand against the American army under General Pillow, and
U. S. Grant was one of the first to mount the hill, and the flower of the cadet army was slain
here, and they were only boys. The occasion has been remembered by the government, and at
the foot of the hill stands a large monument with the names of all the boys who fell. On one
side is this inscription:
“DEDICATED TO THE STUDENTS
WHO FELL
IN DEFENDING THEIR COUNTRY AGAINST
THE AMERICAN INVASION.”
CHAPTER X.
THE PASEO AND BULL-FIGHT.
T HE City of Mexico with its 350,000 inhabitants is a disappointment to the foreigner. The
business portion looks just like an American city. All the Mexican cities are paved with
cobble stones, with the street lowest in the center, which is the gutter. Here the streets are
broad, cross at right angles, high in the middle with gutters next the sidewalk, and are paved
with asphalt. The houses are four story, and the shops have glass show windows, very unusual
in Mexico. The reason is, this is not a Mexican city. It was built by foreigners and is now run
by foreigners.
On July 14, when the French celebrated the Fall of the Bastile, four-fifths of the business
houses were draped in the tri-color of France. With twenty-five foreign consuls, six vice
consuls, and fourteen foreign ministers, each with its attaches and dependencies, it is no
wonder the city’s local ear-mark is lost in this assembly of foreigners; and, were it not for the
languages of Spanish and French which fall so musically on the ear, the scene would not be
very different from a street in Chicago, if we eliminate the vehicles. It is due the foreign
element that the city has the finest boulevard in America.
LA PASEO DE LA REFORMA.
The Latin American races are very fond of carriage-driving, and one of the first signs of
wealth is the laying out of the promenade where the “four hundred” may drive at the
fashionable hour. Before the present Paseo was built, the fashionable drives were Paseo de La
Viga and Paseo de Bucareli. Every afternoon, then as now, were to be seen two long rows of
carriages with crowds of gentlemen on horse-back and multitudes of foot passengers.
The Paseo de Bucareli, or Paseo Nuevo, is in the southwestern part of the city. It was
opened Nov. 4, 1778, by Don Antonio Maria de Bucareli, the viceroy. It has the same starting
point as La Reforma, the circular plazuela in which stands the statue of Charles IV. and extends
half a mile almost due south to the Garita de Belem. In the glorieta near the city gate, is what
was once a handsome fountain, surmounted by a statue of Victory, erected in 1829 in honor of
Guerrero, and which was originally gilded. For promenading, the Paseo is now practically
deserted, but is becoming a fashionable residence section.
The glories of Paseo de La Viga have indeed departed. The once famous and fashionable
drive is almost deserted, save during Lent when an old custom prescribes that fashion shall air
itself there. It traverses the bank of La Viga canal for many miles, past the chinampas or
floating gardens, through a double avenue of shade trees, where continual processions of
Indians are seen from the Lake country, paddling to market with canoes laden to the guards
with vegetables, fruits and flowers.
But Fashion is a tyrannical mistress, and she decrees that Paseo de La Reforma be the only
place to see and be seen. It leads from the statue of Charles IV. to the gate of Chapultepec, two
miles and a half. It is laid with smooth asphalt, and has a uniform width of two hundred feet.
It has double avenues of shade trees on each side, with broad foot ways on the side, lined
with seats for the weary. At certain intervals, the street widens into glorietas, or circles, four
hundred feet in diameter. The street passes on each side of these glorietas and leaves them as
green islands with beautiful flowers and statuary. There are six of these glorietas and more are
to be added.
All along the curbing of the Paseo, are statues of men famous in Mexican history, and are
contributed by different states. At the entrance to the Paseo is the equestrian statue of Charles
IV. of colossal size.
Thirty tons of metal were used in the casting, and it is the largest single casting in the
world. Humboldt says it has but one superior, that of Marcus Aurelius.
A royal order issued Nov. 30, 1795, granted to the Viceroy Marquis de Branceforte to erect
this statue in the Plaza Mayor. The commission was given to the sculptor Don Manuel Tosta,
and the casting in bronze to Don Salvador de la Vega. The mold and furnaces were made ready
in the garden of San Gregorio, and after two days spent in fusing the mass, the cast was made
at 6 a.m. Aug. 4, 1802. The casting, remarkable alike for being in a single piece, and for being
the first important piece of bronze executed in America, came out of the mold complete and
without defect. In 1803, it was erected in front of the cathedral where now is the bandstand of
the Zocalo. Here it remained till 1822 when the Mexicans had achieved their independence,
and the feeling against Spain was so bitter it was encased in a wooden globe and painted blue,
but was finally placed for safety from the mob in the patio of the university, a comparatively
out-of-the-way place. Here it remained in obscurity till 1852 when it was set up in the
commanding position it now occupies. The height of horse and rider is fifteen feet nine inches.
The king is dressed in classic style, wearing a laurel wreath and raising aloft a scepter.
On both sides of the Paseo at its entrance, are colossal figures on high granite pedestals said
to represent Aztec warriors. The work must have been done by Spaniards, in ridicule, for a
more hideous pair of warriors never went to battle.
The first glorieta contains Cordier’s Columbus, one of the most admirable and artistic
modern statues to be found in the world. This was the work of the French sculptor, Cordier, and
was erected at the cost of Don Antonio Escandon. The base is a platform of basalt, surrounded
by an iron railing, above which are five lanterns. From the base arises a square mass of red
marble with four basso-relievos; the arms of Columbus with garlands of laurel; the rebuilding
the monastery of La Rabida; the discovery of San Salvador; a fragment of a letter from
Columbus to his patron Raphadi Sauris; beneath which is the dedication by Señor Escandon.
Above the basso-relievos and surrounding the pedestal, are four life-size figures in bronze,
of monks and missionaries, and crowning the whole upon the top of a pedestal of red marble is
the figure of Columbus, drawing aside the veil which hides the new world.
In the next glorieta is Cuauhtemoc, a worthy companion of Columbus, and is the work of
Don Francisco Jiminez. The statue of the great warrior king is magnificent, as he appears
hurling defiance at his country’s enemies. The base contains some fine basso-relievos, one
representing the torture of Cuauhtemoc (also spelled Guatemotzin) by the cruel Spaniards. The
fretting around the structure is all after the old Aztec pattern, and the trophies of Indian arms
and insignia are all intensely appropriate to the warrior who preferred death of his whole
people to the surrender of his city to the Spaniards. Facing the Paseo is the following
inscription: “A la memoria de Cuauhtemoc y de los Guerreras que Combatieron Heroicamente
en Defensa de su Patria M. D. XXI.”
Mexico is indebted to Maximilian and his wife Carlotta for this Paseo. She had set her heart
upon a “Paseo Imperaliz,” and Maximilian entered heartily into the scheme, but he did not live
to complete it. His idea was to establish a court that should rival any in Europe, and he had
already introduced titles of nobility.
He planned to create a handsome park of Chapultepec, with lakes and streams and drives,
with deer and swans and all the other nice things. What was done he paid for out of his own
civil lists, and he intended to pay for it all and present it to the city. The Mexican people could
not brook a European Emperor, but they all loved “Poor Carlotta,” and as she planned the
Paseo, every year they add some new improvement until it has now become the glory of the
republic. Every addition is an evidence of good taste, and Carlotta’s park idea is already
planned. From the last glorieta two roads branching to Tacubaya and Tlaxpana are being
prepared, and the park grounds will then extend from Molino del Rey to the Exposition
building, three miles.
One never tires of sitting on this boulevard and viewing the motley throng as it passes in
review, driving, riding or promenading. Ladies in Parisian bonnets and Spanish mantillas; the
dashing equestrian rigged in the paraphernalia of Mexican horsemanship, or breeched and
booted after the manner of Rotten Row itself. Stately vehicles drawn by snow-white mules;
four-in-hands tooled along in the most approved European style; youthful aristocrats astride
Lilliputian ponies, followed by liveried servants; here and there mounted police with drawn
sabres, giving an air of old world formality to the whole proceeding. In and out among them
flash the bicycles ridden by men, women and children from all civilized countries; the
kaleidoscope of the pedestrians, dressed in their peculiar garb with red and gray and black
rebosas, raven black hair exposed to view, and the Indians from the mountains in their severe
simplicity. The procession passes up the right, with here and there a light American buggy, or a
heavy-wheeled English mail phaeton with a real live dude at the front holding the reins, and a
liveried flunkey facing behind and holding a flaring bouquet, and, after reaching Chapultepec,
it comes back on the other side, leaving the center to the horsemen, and to the latter’s disgust,
the bicycles.
And we must not forget the centaurs, the Mexican horsemen; rigged out in all the silver
ornaments of bridle and saddle worth more than the spirited horse, and ten thousand people to
admire them, they never appear to better advantage than when exhibiting on the Paseo. Spanish
and Mexican ladies rarely ride, and when they do, they are so very exclusive they ride in closed
carriages. At the glorietas are stationed military bands with from forty to eighty pieces in each,
and the procession always exhibits to “slow music.”
Poor Maximilian, at heart a great man, but the dupe of Europe, planned this city as a king
and died as a king. Could he return now, what might be his feelings to see his plans carried
out? And poor Carlotta! the idol of Mexico, a victim of circumstances, has never forgotten that
fatal day when Maximilian was shot at Queretaro and the flash of the rifles left her a queen
without a throne and a wife without a husband. To this day she drags out a miserable existence
at the Austrian capital, a maniac that has spent thirty years murmuring and jibbering his name.
There is in America a miserable lack of respect to kings, be they never so good and kind and
great, and Mexico was only true to the free air of the mountains when she refused Maximilian.
Mountain-born men will always be free.
BULL-FIGHTING.
The Aztec in his palmy day offered human sacrifice. He daily made war upon his neighbors
to secure the victims, and washing his hands in gore has been his profession for six hundred
years; this is why bull-fighting with its fascination and danger and death is to him so dear.
Every Sunday afternoon and every feast-day is given up to this bloody pastime and
everybody goes. The foreigner goes once, sometimes twice, but rarely three times, but he never
forgets what he sees. Four dead bulls, three dead horses, from one to three maimed or dead
men is the possible result of a Sunday’s sport. Each city has its plaza de torus or bull-ring, just
as we have theaters, and the bull-fighters go from town to town as our opera companies. The
stars of the company are the swordsmen. The bull-ring is a circular amphitheater, after the
manner of the Roman Coliseum, and will seat from four to twenty thousand. The government
takes a strong hand in lotteries and bull-fights, and in the latter, receives twenty-one per cent.
of the gate receipts. In the federal district, the secretary of the republic presides at the fight.
Four different haciendas are licensed by the government to breed bulls for fighting
purposes, Durango and Cazadero being the most noted. Poncama Diaz, a nephew of the
president, is called the star matador of the world, and owns the Bucarelli bull-ring in the city,
which is capable of seating 20,000 people. The arena is a circle 200 feet in diameter, and open
to the sky. Around this is an eight foot wall to protect the people, and at intervals along this
wall are “escapes” for the fighters when the bulls decide there is not enough room in the ring.
Receding from the ring are the tiers of seats arranged in the manner of a circus. Those on the
shady side usually selling for a dollar, while the “bleachers” sell for 25 or 37 cents. Over these
seats are the private boxes, and above all the gallery for the olla podrida.
An ordinary troupe consists of two matadores or swordsmen, four banderilleros or dart
stickers, two or four picadores or lancers, and the lazadores who lasso and drag the dead
animals from the ring. The program usually consists of the killing of four bulls in an hour, with
sometimes an extra. The president of the function, (every thing here is a function) may reject
any part of the performance or fine any member who commits a breach of ring etiquette. The
performance is set for four o’clock and is always the same. The crowd waits, grows impatient,
the band plays. The crowd grows more impatient, the band plays again—plays all the time.
Finally the judge appears, (every function must have a mediator between the people and the
event) and is seated in his decorated box, and the band plays again.
The judge makes a sign to the bugler who blows the opening of the gates, through which
comes a snow-white horse bearing a rider dressed in green and gold, with knee pants and silver
buckles, flowing cape, cocked hat and waving plume. This is the president of the company, and
he begs the permission and approval of the fight. The judge assents and throws him the keys of
the bull-ring, (what else is he there for?) and the rider retires. Again the bugler blows and the
company enter in full force, and the costume of each is worth a thousand dollars in gold. No
two are dressed alike as to color. Silk jackets that reach the waist, knee pants and silk stockings
and a cockade hat, all present the prismatic colors of the rainbow. Around each is a Spanish
cloak, held around the waist with the left hand. As they make their bow to the audience, the
cloak is let loose with the left hand and swings around gracefully pendant from the left
shoulder.
Again the bugle blows, and through the open gate a fierce bull from the mountain is
ushered in. As he passes the gate a man overhead thrusts a steel dart into his shoulder, and on
the dart is a rosette and a silk ribbon bearing the name of the hacienda whence he came.
Maddened by the wound and frightened by the noise and people, he seeks the cause, and sees
two horsemen in the arena. The horse is blindfolded to prevent his shying, and has a piece of
sole-leather covering his side for protection. The horseman has a lance and endeavors to thrust
it into his shoulder to ward him off. The lance point is short and is not meant to do serious
harm, but to wound and irritate the bull and make him furious for the final battle. Sometimes
the lance fails to score, sometimes it holds in his tough hide and the handle breaks and the bull
buries his horns in the horse’s belly, and hurls both horse and rider in the air.
The horse was intended for the sacrifice from the beginning, and this was a part of the
program. When the bull has killed one or two horses, he is encouraged to fight, and that is just
what the whole thing is for. A man with a red flag draws the bull’s attention to the other side
while the dead horse is dragged out, and sometimes a dead man. Again the bugle blows and the
ring is cleared, and two banderilleros enter. With a red flag one gets the bull’s attention, and a
banderillero runs to the center. In each hand he holds a banderilla, a sharp steel dart about a
foot long, and ornamented with rosettes and streamers. When the bull charges, he must reach
over his horns and plant both of his banderillas in a shoulder at the same time. Sometimes the
spread of horns is four feet, and the banderillero must make the pass and escape in a flash. As
the bull makes the charge in a frenzied run, you find yourself unconsciously rising from your
seat in anticipation of the almost certain death of the man, and women who see it for the first
time usually faint and are promptly carried out.
Should the man succeed in planting the banderillas, the crowd shower cigars and flowers
and fans upon him and shout bravo! bravo! Should the bull succeed in thrusting his horns
through the man’s equatorial region and toss him in the air, the crowd shout bravo torus! just
the same and cheer and whistle. They paid their money to see blood and what does it matter if
it be man or bull’s? At this point it is proper for the American ladies to faint and come to and
hurry out, while the Mexicans laugh at people who leave before the fun begins. The idea of
fainting for such a small thing! The dead man is carried out and the other banderillero takes his
place, and as the bull charges he must plant his banderillas in the other shoulder. Sometimes the
experts vary the program by sitting in a chair until the bull is within six feet of him, and then
rises and makes his thrust in time to escape, and the bull goes off writhing in pain and trying to
shake the cruel darts from his shoulder.
Sometimes a detachable rosette is thrust between his eyes as he charges, and the stream of
blood that follows betrays the steel point behind the beautiful rosette. Then men with red flags
will tantalize him. They stand behind the flag, and as the bull charges the men step aside,
holding the flag at arm’s length in the same place, and the bull passes under the flag into empty
air, where the man was. Quick as a cat he detects the fraud and turns upon the man, who makes
a two-forty sprint to one of the escapes, where the bull tries to batter down the planks to get to
him. The bull is now mad enough to fight a circular saw, and again the bugle blows. The ring is
cleared and now enters the matador. The judge hands him a red flag and a sword. He must now
challenge the bull to single combat, and to the victor belong the congratulations, and the man
knows full well that if he gets killed the crowd will cheer the bull just as heartily as they would
if it were the other way.
All the preliminaries of the fight were to aggravate the bull to his highest fighting power,
then turn him over to the matador, the “star of the evening.” Rules as rigid as the Marquis of
Queenbury prevail, and woe to the man who should violate a rule or take advantage of the bull!
The judge would instantly order him from the ring and fine him. The ethics of the fight require
that the man shall stand in the middle of the ring, wave the red flag as a challenge, and as the
bull starts toward him put the flag behind him. As the bull charges, he must reach over his
horns, thrust the sword through his shoulder, pierce the heart, and the point of the sword must
appear between the bull’s fore legs, and it must all be done in a single stroke.
The hand and the eye must be as quick as lightning to do that when the bull is on the run. If
the stroke is successful, the sword flashes a moment in the air and the next its hilt is resting
against the shoulder blades, and the bull falls as if struck by lightning. Then the air is rent with
shouts and dollars and fans and handkerchiefs, and with one foot upon the dead animal, the
matador bows his appreciation. The bugle blows, the two lazadores gallop in, throw their
lariats over the two hind legs of the bull, and without checking their gallop, drag him out and
prepare for another. A bull is killed every fifteen minutes as regular as the clock.
Sometimes the sword misses the heart, and the bull walks off with a stream of blood and an
ugly sword wound, and then the hisses and remarks that fall upon the matador sometimes drive
him to suicide. I saw a matador driven to desperation by the hisses, and seizing another sword
he made the stroke just behind the ear, severing the medulla oblongata, a more difficult stroke
than the other, thereby redeeming himself. Sometimes a bull with wide stretch of horns will
disconcert a matador and he will attempt to retreat at the last moment, but then it is as often
death as escape.
One Sunday a company had unusually bad luck. Three horses and two men had already
been killed, and only two bulls, and the troupe had no more matadors. One man was
apologizing to the audience that the sport could not proceed as he had already lost two men,
when the bull suddenly made a charge upon him and caught him between the shoulders. The
“sport” closed for the day, and the people pronounced it a great success.
The next Sunday there was hardly standing room from the crowd that came back hoping for
a similar show. I met the crowd returning, and asked how was the fight? Several shook their
heads and looked dejected. “No bueno, nobody was killed and the whole thing was a fiasco.” If
a bull refuses to fight after the lance has been thrust into him, the bugler at a sign from the
judge blows him out. It must be a bloody, thoroughbred fight or none at all. It requires a long
education to harden people to suffering and blood as these people practice daily. I saw two
soldiers walk out of the barrack to fight a duel with pocket-knives, and a hundred people stood
by and saw them kill each other and not a hand was raised to stay them. The modo duello
among the cow-boys is very effective. When two cow-boys have a difficulty that cannot be
settled, their friends take them off and tie their left hands together and stick two bowie knives
in the ground for their right hands, and leave them. The one that is left alive can cut himself
loose and come back to camp. If neither comes back by the next day, the friends go over and
bury them. There is also a woman bull-fighter in Mexico; her name is La Charita. Arizona
Charley, an American cowboy has also endeared himself to the Mexican heart by proving
himself a first-class matador. Bull-fighting is as much a national sport as our base-ball. At one
time it was interdicted in the federal district, and the people would go to Puebla every Sunday,
seventy-five miles away, to see the “sport.” To the lovers of the sport it matters little whether
the bull or horse or the man gets killed, or all three. What they want is their money’s worth.
The meat is sold to the butchers after the fight, and Monday morning when the waiter asks
the Americano how is his steak, the answer generally comes, “It’s bully.”
CHAPTER XI.
LA VIGA CANAL.
O N the side-walk adjacent to the western entrance to the cathedral is an iron and glass
Kiosk. This is Mexico’s flower market. Every morning in the year from daybreak until
eight o’clock, the sidewalk and the adjoining street is one mass of fragrance and color.
Every flower you know and as many as you do not know are spread in the greatest profusion
possible, which fact suggests an inexhaustible supply-house somewhere. Here are roses,
jassamines, pansies, violets, heliotropes, sweetpeas, gardenias, camelias, lilies, honeysuckles,
forget-me-nots, verbenas, lark-spurs, poppies, morning-glories, tulips, geraniums, and orchids
of untold variety and color. And there were purchasers. Priests from all the churches, milliners
and café proprietors, dry-goods’ merchants, hotel keepers, the señora in her private carriage,
señoritas with holy shrines and patron saints to honor, devotees whose special saint day is to be
celebrated by a fiesta—everybody buys flowers, and they come by the ton as fast as other tons
are sold. And they are arranged by master hands into cornucopias, crosses for the church altar,
wreaths for the funeral car, decorations for the cemetery, and into any design the purchaser may
indicate.
GROUP EL ABRA.
I ask where such a world of flowers can come from in such an unbroken stream. “From Las
Chinampas,” the floating gardens. Floating Gardens! that sounded like the tales I had read, and
here are people just from them! I anxiously ask where are they: “En Canal La Viga;” and so the
search began. A street-car takes us to La Embarcadero where a hundred eager boatmen leave
the wharf and come running to see us. I always thought I was popular, but here was an ovation
I had not looked for. Then I learned something new. Each of my hundred friends had the best
boat on La Viga, and each of my hundred friends was the best pilot from the canal to the lakes.
Here was absolute perfection in ship building and nautical knowledge that would make
Diogenes put up his lamp and say: “Eureka!” After each had extolled the virtues of his
particular scow, or flatboat, or raft, whichever it approached nearest in appearance, we chose
one.
If Canal La Viga was ever dug by man, history is silent about it. It was here when the
conquerors came. It serves the same purpose as Niagara River, and brings the water of Lakes
Chalco and Xochimilco down to Lake Texcoco. It has a uniform width and depth, and its banks
are lined with stately avenues of trees the entire length. To the great middle-class and Indians,
this is the great highway of commerce and resort for pleasure. Sundays and feast days it is a
mass of moving color. In the dim past this city was the Venice of the New World, so boating is
an inheritance. The boats are from ten to fifteen feet long; from four to eight wide and are
generally poled along. There is an awning and comfortable seats where the passenger may
enjoy the scenery protected from the sun. You make any arrangement you can as to price, and
your boatman spits on his hands and pushes off, and if it is early in the morning you meet
hundreds of crafts coming to market loaded down with fruits, grain and vegetables, pigs, lambs
and chickens, and charcoal and baskets and everything else that the Lake country produces.
The vegetables, by irrigation, surpass anything you have over met in that line; heads of lettuce
larger than cabbage, and radishes as large as an ear of corn. A diminutive steam tug is met,
trailing twelve or fifteen barges loaded with grain and cordwood from the upper lakes. Under a
shade tree by the water, is a laundry after the fashion of the country, and a man and woman are
washing clothes. The man’s part consists in sitting down and looking tired while the woman
scrubs.
If it is Sunday the boats are laden with garlanded merry-makers with tinkling guitars and
singing and dancing and having a “large time.” On the right is the once famous Paseo de La
Viga, whose glory has long since departed to the Paseo de La Reforma. In spite of its neglect,
La Viga is one of the most delightful drives in the city, especially in early morn, when canal
traffic is at its best, and during Holy Week when the great middle-class take their holiday.
Almost immediately after starting, we reach the old puebla of Jamaica, which, like the Paseo,
has the look of having seen better times. On the opposite bank and by the Paseo, stands a
melancholy bust of Guatemotzin, the last of the Aztec chieftains, whom the Mexicans delight
to honor—another testimonial of ancient aristocratic grandeur. The next point of interest is the
old Garita de la Viga, the custom-house building, dating back to Spanish times.
Until a month prior to this writing, all boats paid custom duties on whatever merchandise
they brought to the city. When the duties were paid the smaller boats were admitted through a
small gate-way, which necessitated the lowering of the awnings, while the large ones had to
discharge their cargoes.
On the up-stream side of the romantic old bridge is always a blockade of boats of every
description, from mud scows to steamboats, waiting for a transfer. The first town beyond the
Garita is the quaint little town of Santa Anita, the Coney Island of the Canal. It is essentially a
Mexican town of thatched reed houses, nearly every one a restaurant for the sale of those
unnamable dishes one meets with so often, which have a far-off smell, but fill a long-felt want.
After hearing their names called, you are no wiser, but feel better. There are also liquid and
semi-liquid refreshments to suit the taste, provided your sense of taste has been destroyed
before coming here. The insidious and seductive pulque mixed with the firey tequila and
mescal are all loaded with malice præpens, and are better left to the lava-scarred throats that
have met them before. All the fruit drinks are excellent, but the drink par excellence is the pina.
It is made from grated pine-apple, sweetened with sugar and cooled with the snow just brought
from Popocatapetl that morning.
When Horace sang of the wine of Brundusium cooled with the snows of Hymettus, he had
not heard of the pina of Santa Anita backed up by Popocatapetl. Here are games, and all
manner of games peculiar to the people, and flower-booths where the people buy flowers and
garland each other, where even the humblest may wear a crown woven of fragrant flowers
woven by the hand of Romeo or Juliet, only they call each other Ramon and Inez. Here is a
fine old church with a beautiful tower and a diminutive plaza with restful seats and entrancing
music.
Be sure to stop at the hacienda of Don Juan Corona. He was a retired bull-fighter, and in his
old age became antiquarian, and his house is a vast museum of costly and rare antiquities.
When he died he left a legacy to found a school for the poor, and if you have any pennies to
bestow upon the señora who shows you around, they will be well spent.
We leave the merry-makers and proceed on our search for las chinampas, after our
boatman has mulcted us for coppers enough to tank up at a pulque joint. The thick ropy liquid
has loosened his tongue in a marvelous manner, and the flood gates of his information bureau
are raised, and for an hour he gives us chapters of unwritten history and legends of the country.
That which I knew, he gave in Spanish, and that which neither of us knew he gave in Aztec,
and he justified his claim of being the best informed guide on La Viga. Henceforth I call him
Ananias. The two snow-clad volcanoes were close by on our left and I asked him which was
Ixtaccihuatl and which Popocatepetl. “This is Esclaéwa and that is Popocaltepay,” he promptly
answered. I said: “Man, your pronounciation is bent a little bit to starboard; everybody else
says Popocatepetl.” “Of course they do,” he said, “which only proves that everybody else is
wrong. I say it is Popocaltepay.” That scored one more for that designing pulque, and added to
the title of Ananias, that of Geographer with a pedigree only three removes by blood from
some people Baron Munchausen once knew.
The next town reached was Ixtacalco, where the people seem to have sobered down, and
the burg showed less bent for pleasure and more for business. Here a fine old stone bridge
crosses La Viga, and a discouraged old chapel with its portals wandering down to the water’s
edge, where, in the good old days gone by, the boatman muttered an ave and deposited his
offering to the saint in whose honor it was consecrated, in the hope that good luck might attend
his market voyage. In front of the church, dedicated to Saint Matias, and which is a Franciscan
foundation of more than three hundred years ago, is a little plaza with a fountain of running
water. Along the lane from this plaza and marked by a palm-tree, is the ruin of what was once
the chapel of Santiago, which is used as a dwelling.
In the midst of these inhabitants is the remnant of what was once a most gallant image of
Santiago himself, now galloping to defend the faith on a headless horse, another relic of the
romantic past, the work possibly of some cavalier of Spain, under the leadership of that prince
of brave men, Hernan Cortez—for cruel as he was, we cannot withhold from him the meed he
justly earned in bearding the lion in his den, though The New World Venice was buried in his
blood-reeking canals. Who knows whose work it was, least of all the inhabitants of Ixtacalco,
or the mutilated image itself, or if it knows, it discloses not its secret. We told Ananias to drive
on, but that worthy assumed an electrocuted countenance that was wonderful to behold. The
long distance had already paralyzed one side, and “He barely had strength enough to take him
back to the city, and the Lake is fifteen kilometers. You will have to hire another boatman from
here, and señor, by all the saints I could not pass that bridge, it is beyond my territory, and
besides, señor, how much more will you give me to carry you to the next town?”
There! at last we see him in his true light, a pirate! Three well-earned titles in one day and
it was not a very good day for titles either, and he had no appearance of aristocracy either.
Certainly he did not belong to the Order of the Bath. “Here,” said I, “I will give you three cents
to get drunk and drown yourself.” Off came his sombrero and down came a salaam almost to
the prow of his boat. “Señor, I think I heard you say you wanted to see the chinampas.”
“Chinampas! why of course, that is what I left the city to see, where are they?” “Well señor, we
passed the floating garden a mile back at Santa Anita.” Caramba! Here was the title of knave to
add to his already long list. With the hope of “holding me up” at the bridge for a raise in wages,
he had silently passed the chinampas for fear I would stop.
My admiration began to grow for this Captain Kidd, and I was anxious to know how many
cards he yet held up his sleeve, but it was expensive, so telling him to soak his head, I crossed
the bridge and struck out upon the causeway, and for miles and miles there was nothing but
chinampas! They could have been seen from Ananias’ boat had it not been for the bank of the
canal. This then was the mint where the flowers and vegetables were coined for the great city.
Floating garden is now a misnomer. In years gone by they really floated on rafts, but as the
French say “Nous avons change tout cela.” Since the lake was drained they are all stationary
and are likely to remain so unless “Popocaltepay” resumes business again.
The Chinampas are a net-work of islands—Venice moved from the city to the lakes. The
land-owner simply taps the canal with a ditch, leads it around three sides of a square and brings
it into the canal again, making a rectangular island of any dimension he chooses. His neighbor
beyond taps to his canal, and the system is extended for miles and miles just like the streets of a
city, the business blocks answering for the islands. Through these canal streets dart thousands
of boats that harvest the crops that grow here forever. Surrounded and saturated with water the
chinampas are always moist and fertile and as there is no winter it is one perpetual seed time
and harvest. The accumulated humus and vegetable matter make it unnecessary to even
fertilize.
Broad streets cross these areas at intervals and among these islands and along the
causeways the Indians live. No mosquito is ever billed for an evening’s entertainment, and the
voice of the mud-turtle is not heard in the land. Malaria? perhaps, but what of that? A few
dollars to the priest, a few masses for the soul in Purgatory, and the general average in the end
is about the same. Your average Indian, like the Hindoo, is a fatalist, and “Kismet!” what is to
be will be. There is something of beauty in these humble homes, and where flower-growing is
a profession, it would be strange if their beauty had left no impression upon the lives and
homes, and so all the people of La Viga decorate with flowers. The thatched house of reeds will
be hidden under its wealth of vine and flower of the copra del oro with its immense golden
cups approaching in size a squash blossom. Within these huts are specimens of dark beauty and
features and wealth of hair that many a fairer maiden might envy. Seated under her own vine
and pomegranate tree, wrapped in thought and a scant petticoat, she weaves a mat of rushes or
knits a hammock that will find its way to the home of some who read these lines.
Are they happy? “Where ignorance is bliss,” etc. They were born here, their parents before
them were born here, this beautiful valley has all the charms to them that your home has for
you. And is not Antonio here? and is he not the best gardener on La Viga, and are they not
going to the little chapel next fiesta to be joined by the priest? Surely happiness in this world is
measured by the contentment of our lot.
Not all the people of the Chinampas have boats. The great highway along the bank carries
more passengers than the placid waters. An Indian woman with a hundred and thirty pounds on
her head will trot her thirty miles to market and return next day. I say trot because no other
word will do. All people of the burden-bearing class have a swing trot that they keep up all day.
And the income! what glowing picture of opulence does the Indian not feel when he spends
two days in the mountains burning charcoal, then loads himself and burro with his wealth, and
trots his twenty miles to market? A dollar and a half for both loads would drive him speechless,
but let us confine ourselves to actual facts, and grant him a whole dollar. He counts himself
well paid, and the five days labor and forty mile journey count for nothing. He is not selling his
time, but his carbon which he patiently peddles till sold, only keeping enough to feed his burro
with. I suppose he feeds him with it, for I am sure I have never seen him carry along anything
else that looked like feed. For dessert a few banana peels around the market place and broken
pottery is about his only chance unless good luck blows some old straw hat his way; then he
feasts. Time! What is time to the Indian? Has he not a whole year?
The next town on La Viga is Mexicalcingo, seven miles from the city. Before the Conquest
it was of some importance, but now only a straggling village with dirty streets, which shelter
possibly three hundred people. The ruins of the monastery and church of San Marco, built by
the Franciscans, are here. The old causeway and military road, seven miles long, that once
crossed the lake from Mexico to Ixtapalapan, crosses La Viga at this point. This was a
dependency of the Aztec City. A very picturesque view of the high old bridge of Aztec time is
had, and the bright green maize on one hand, and the old ecclesiastical building on the other,
bowered in masses of dark green foliage, are very pleasing. Past the ancient old bridge the
scene changes but little except there are less signs of habitation, and finally the last town of La
Viga is reached, Culhuacan. This is a picturesque old town, half of it built on the hill, and here
are the ruins of a fine old church and monastery. Here La Viga begins to broaden out into a
lake, and everywhere, both parallel with it and at right angles to it, are many branches of the
canal, which in wet weather are small lakes themselves.
The journey might be continued out into Lake Xochimilco “The Field of Flowers,” and the
quaint and beautiful town of the same name would be well worth the time; but we started out to
see where all those beautiful flowers came from, and veni, vide, I returned.
CHAPTER XII.
THE SUBURBS.
T HERE are twenty suburban towns around the capital that can be visited by horse-cars, or
as the natives say, “tram-vias.” They are Atzcapotzalco, Tacuba, Tacubaya, Jamaica,
Santa Anita, Chapultepec, Molino Del Rey, Churubusco, San Angel, Castaneda, Tlalpam,
Cepoyacan, Popotla, San Joaquin, Contreras, Azteca, Nueva Tenochtitlan, Guadalupe,
Tlaxpano, Tlalnepantla and Mixcoac. You will notice that most of them bear Aztec and not
Spanish names, which means that they are older than the Conquest, and are worth seeing, even
though you do not get out of the cars.
The farthest away is old Tlalpam, about 20 kilometers, and most of the journey is made by
steam. Seven or eight cars leave the city, drawn by mules to the gate of the city where they are
coupled together, and a locomotive pulls the train through the beautiful valley at the rate of
fifteen miles an hour. It makes one feel a little bit creepy to know that he is thus hurried along
in a train of street cars, but they are made by a reliable New York firm and that gives
confidence. We pass through a valley overlain with volcanic tufa, and herein lies the secret of
the wonderful productiveness of this farming land. It is easily pulverized and makes a fertilizer
as potent as the commercial ones. Old Tlalpan is on the rim of the valley and the foot hills of
the plateau, and is a residence suburb of the wealthy who do business in the city. The walls of
the private residences are as forbidding as a penitentiary. Solid masonry from ten to twenty
feet high, capped with broken glass fastened in cement.
A Mexican’s home is indeed his castle, to which he enters through stone walls and iron
gates. You are not wanted there and are never invited. I knew an American professor who
taught five years in Mexico, and had seen the inside of only three homes, and then he went on
business, and saw none of the female members. Such is the custom and seclusiveness of the
people.
Tlalpan reminds me of a citizen of New York who went into a fin du siecle saloon to get a
drink, and when he paid his reckoning it was one dollar. He naturally protested against the
exorbitance, and the clerk called his attention to his surroundings. “My dear sir, look about
you; this is no dive, these paintings cost a hundred thousand dollars.” The victim paid the
dollar, and thought long and deeply. The next day he returned by way of a harness shop, and
got a pair of blind bridles that draymen use on their horses, and thus equipped he entered that
aristocratic saloon and walked up to the counter. “Gimme a drink straight without any scenery
today.” That is old Tlalpam. Every street has its blind bridles up and no scenery, but it is not
peculiar to Tlalpam. I have never seen a Mexican’s home with a front yard. At the edge of the
sidewalk up goes his stone house or his stone wall, pierced with an opening and closed by a
heavy iron gate fastened always on the inside. Members of the family have to give the
password or its equivalent before it is ever opened, and tramps are unknown. Life would have
no pleasures for a tramp who could not open the back-gate and creep up to the kitchen and
frighten a woman to death by a flash of his living picture.
In Tlalpam you walk a block between high walls to the cross street, and do the same to the
next and the next, and you can imagine how delightful it is, “Straight without scenery.” You
must not forget that none of the streets have shade trees. So after I had admired all the
beautiful stone walls and stone pavements, a wicket was suddenly opened to pass someone in,
and I got a flashing glance of languid señoras and señoritas taking their siesta in hammocks
swung between lime trees redolent with fragrance and—some one shut the gate. If that sleepy
old town thought that I had come all the way there to look at the stone walls, little did it know
me. I pounded on that gate till the startled inhabitants thought I was trying to break into jail,
but I got in, and found myself in one of the most beautiful and fascinating places I had yet
seen. The spraying fountains and flowers and song birds, and the Moorish setting of the
surroundings, took me back to the wonderful stories of the Alhambra. Meanwhile that
astonished household was all agape at the unheard of intrusion, but great is the power of
flattery. I frankly told them that I had been sent all the way from the United States by a
committee of one, to hunt out the most beautiful places in Mexico and secure their
photographs at all hazard to display and strike dead with envy the people who live in the stuffy
cities of America. That on that very morning I had left the City of Mexico for the express
purpose of getting a picture of the finest place and the most beautiful ladies in Tlalpam, and
with that end in view I was here.——“Enough Señor, enough! Take us; we are all yours, the
house, the fountains, the trees, the girls—they are all yours, take them.”
Here was eloquence and victory combined and I did not know what to do with all the
victory. I had solemnly promised not to accept any more costly presents from these good
people, but this bunch of girls seemed to be different from hotels and other real estate, so I
resolved to make the old gentleman a present of his house and lot, and keep the girls: so I very
gladly embraced—er—the opportunity of posing them for their pictures. Why these good
people should hide so much loveliness and beauty behind impassable stone walls is beyond
my ken.
How old is Tlalpam? I don’t know, but it began at a time when the memory of man runneth
not to the contrary. Upon the walls, the crop of glass planted in the cement did not seem to
flourish very much. It was a very glassy looking glass and seemed to need irrigating, but time
is long with these people, and if it does not pan out a crop in the next fifty years, they will wait
patiently for manana, that scape-goat of all incompleted enterprises—to-morrow. I don’t know
whatever gave these people an idea that they could grow glass anyway, unless it was the
Spanish moss. This moss is a parasite that grows upon all kinds of trees, but in old Tlalpam it
grows upon the wires stretched across the street to hold the street lamps, and it is aristocratic
moss that grows with its head up instead of trailing, and I call that making headway against
adverse conditions. The weeds and cacti upon the wall seemed to make their way better than
the broken glass, and when I last saw them, they were green and were getting up in the world.
“But it is a long lane,” etc., as the proverb says, so at last the supply of aristocracy gave
out at the rise of the hill, and we reached the realm of the great unwashed, who had neither
walls nor rags to hide their nakedness. The happy children were clothed with innocence which
needed no other protection than the blue sky and the Republic of Mexico.
Higher and higher we go up the hill. The avenue we started in led into the main street, this
street finally led into a path, and the path terminated in a cow trail and this trail merged into a
squirrel path which ran up a tree; so, like the King of France, “We marched up the hill, and
then marched down again.” But before starting down we stopped to rest at the tree where the
squirrel trail disappeared, and looked over the valley, and could realize the emotions of Cortez
when he stood at the same place and viewed a similar scene. Across the silver lake lay the City
of Mexico, twenty kilometers away, with its thousands of spires and pulse-throbs that supplied
the veins and arteries and capillaries to the fortunes and hopes of its tens of thousands of
dependencies. No wonder Cortez said it was the fairest city man ever looked upon. The one
thing a stranger never quite masters here is the rarified atmosphere which destroys all ideas of
distance and nullifies all laws of optics. You have traveled the road and know it is twenty
kilometers, but the city is brought so like a mirage that you seem almost able to hear the clock
strike. We leave our squirrel path and find ourselves in the city of the dead, a beautiful place
shaded with eucalyptus trees and furnished with restful seats.
Soon there enters a figure heavily veiled and places a wreath of amaranth upon a new-
made grave, marked with a wooden cross, and R. I. P. We leave her to her sorrow and follow a
limpid stream from the mountain back to the city below. Beyond is the parched chaparral and
the thorny cactus now laden with its harvest of purple tunas, surely the manna of the desert for
these discouraged-looking peons. Beside the stream were green trees of limes and oranges and
English walnuts and agua caties and an air of restfulness.
We follow the stream into the little plaza with its spraying fountain and fragrant Datura
suaveolens, which grows into quite a bush. The pleasant seats invite us to sit and listen to the
notes of the noisy purple grackle and the discordant tropical jay as they take their morning
bath. Rip Van Winkle is still asleep and Mrs. Xantippe R. V. W. has not yet come from the
market, and so for fear of disturbing the serenity of that Elysian Field, we tip-toe back to the
station where the car is waiting, and that sleepy old town does not know to this day that a band
of camera fiends invaded its sacred precincts, even unto its highest citadel and returned
without the loss of a single man. Happy Old Tlalpam. R.I.P.
Back across the ancient bed of the lake we fly, and where once was Montezuma’s fleet are
herds of sleek cattle, knee-deep in rich alfalfa, awaiting their turn to contribute to the material
welfare of the mammoth city. We reach a junction, Churubusco! Immediately we think of that
history class of twenty years ago, when we had to “stay in” after school because those battles
would not fight themselves in the right places; when Chancellorsville and Crown Point and
Saratoga and Churubusco could not agree as to time, place and manner. Here was a chance to
settle one point, even if the teacher had long since died of worry, and we anxiously get out and
look.
“Where is Churubusco?” “This is Churubusco.” “But,” I said, “I don’t see anything but a
street-car stable with come mules in it.” “All the same this is Churubusco.” “Well,” I enquired,
“where does this mule car go from this junction?” “It goes to San Angel, a summer residence
town.” I determined to go out there and come back when my mind was settled to take a look at
Churubusco, but when I got back, there it was, just an adobe mule stable. I sat on a bench
opposite and tried to think what did General Scott want with the stable, and why they put it in
the history. I suppose it was put there to punish unoffending little boys who liked to play base-
ball. I took out my camera and prepared to shoot the harmless stable, and changed my mind. I
was not on a warlike expedition, but was in pursuit of knowledge, and I did not want to add
another blot on the sanguinary page of America’s Dr. Ledger. No, not for a brevet. I put up my
magazine.
A general vegetable merchant, who had three cabbages and four turnips on a board, seeing
my troubled countenance, very kindly came over and said: “Que pense, Señor?” I said: “I am
thinking about General Scott bringing his army up here after that car stable and then did not
take it away after you gave it to him. Now don’t you think he was off his base?” He shrugged
both shoulders, took his cigarette from his mouth and thought a minute, and then he uttered
these words of wisdom: “Quien sabe?”
I said, “Well if you live here and do not know, how am I expected to know, and what are
the histories to do about it? And my good fellow, just between you and me and the gatepost,
don’t you think if General Scott had come here and taken a good look at that stable first, he
would have gone on to town and had a good night’s rest, and saved me all this unrest and pang
of conscience about that history lesson, and that poor dead teacher?”
With his eyes full of pity he said: “Señor, are you hungry?” “Yes I am, and I am disgusted
with your old street-car stable.” “Señor, here’s your car if you are going to town.” I turned my
face to the city and my back on Churubusco.
We soon reached the city gate, where the locomotive was unhitched and the mules were re-
hitched, and we were soon on the street, where we met a funeral car with its black canopy
flying behind, as the mules, under whip and lash, hurried to the city of the dead, and I went to
drown my thoughts in a glass of pina. Others may have this drowning mania sometimes, so I
give this recipe free gratis for nothing, as I got it from the señora on the Zocalo. The pine-
apple is first pared and sliced as we do apples. Then on her knees the señora takes her stone
rolling pin and stone vessel like a wash board and reduces the slices to pulp, which is strained
and sweetened and iced, and is sent to you by the señorita, who guarantees to drown all your
troubles for just six cents, and she innocently prattles away until the glass is empty, and “of
course the caballero will have another.” Under ordinary circumstances you would not, but
many a man has taken his second glass there just because he did not know how to say no. The
next car is bound for Atzcapotzalco, so we jump aboard and pass out upon that terrible
causeway where the Spanish army were almost annihilated on that memorable night of Noche
Triste, July 1, 1520.
At the bridge you pass through the Riverra de San Cosme and are shown El Salto de
Alvarado. Alvarado was the most trusted lieutenant of Cortez, and on the retreat that night the
Aztecs cut the causeway and the waters rushed in, separating the army of Cortez into two
parts. Alvarado was fighting in the rear, and when he attempted to join Cortez he found the
dike cut. His men were all killed or taken prisoners, and he gathered all his strength and made
the leap from the end of his lance that made him famous. Authorities do not give the distance,
but say it was impossible for any other man. Aztecs and Tlaxcalans alike looked on in
amazement and cried: “Surely this is Tonatiuh, the child of the Sun!”
Here the Aztecs stopped to gather up the rich booty which Cortez had taken from their
treasure-house and was forced to leave behind in the breach, and the circumstance alone
enabled the invaders to reach the village of Popotla, a mile further, where Cortez sat down to
weep over the destruction of his army. The tree under which he sat is by the side of the street
and is known as the tree of Noche Triste—Melancholy Night. It is a cypress and is called by
the Aztecs, Ahuehuete. Some years ago a religious fanatic set fire to it and disfigured it, but it
still shows a trunk forty feet high and the same in circumference. The American tourists were
about to take it all away as relics, so the city was compelled to enclose it in a lofty iron fence,
which is fully able to enforce the ordinance, “Keep off the grass.” The natives very naturally
expected me to attempt to scale the fence and get a branch, and to let them know that all
Americans could live up to their reputation. I vigorously shook one or two of the iron posts
which stubbornly refused to leave the enclosure. All the same I felt proud; I had proved to

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Microeconomics 2nd Edition Bernheim Test Bank

1) An externality occurs when ________.

2) Which of the following is the best definition of an externality?

6) Which of the following is NOT true regarding externalities?

7) Traffic congestion is an example of a ________.

9) When the production of a good generates negative externalities, ________.

12) If negative externalities are present in a market, ________.

13) If the production of a good involves negative externalities, ________.

22) Which of the following is likely to generate a negative externality?

38) A positive externality ________.

42) The presence of a positive externality in a market leads to a(n) ________.

43) If the production of a good involves positive externalities, ________.

71) Which of the following is necessary for markets to operate efficiently?

9.2 Private Solutions to Externalities

2) Which of the following occurs when an externality is internalized?

Profit with Filtering Profit without Filtering

24) Which of the following is an implication of the Coase Theorem?

25) Private solutions to externalities are most effective if ________.

27) What does the Coase Theorem predict?

1) Government invention is required to solve externality problems if ________.

2) Refer to the scenario above. The council's action is an example of ________.

10) A Pigouvian tax is a tax designed to ________.

12) When a Pigouvian tax is imposed, ________.

20) A Pigouvian subsidy leads to a socially efficient outcome by ________.

22) Which of the following is true?

27) Efficient government intervention requires that ________.

30) A Pigouvian tax is also called a(n) ________.

Corn Demand: QD = 70 - 5p,

Inverse Demand: p = 14 - 0.2Q

MSC = MPC + MEC = 0.1Q + 0.5 + 1.5

9.4 Public Goods

1) Private goods are ________.

2) If a good is excludable, ________.

3) A good is non-rival in consumption if ________.

5) Which of the following is an example of an ordinary private good?

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

7) ________ are highly excludable but non-rival in consumption.

8) ________ are non-excludable but rival in consumption.

10) ________ are non-rival in consumption.

11) An online newspaper is an example of a(n) ________.

12) ________ is an example of a common pool resource good.

13) Which of the following is an example of a club good?

15) Rides in a public park are ________ in consumption.

16) The view of a spectacular sunset on a beach is a(n) ________.

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

21) A room heater is a ________.

22) A street light is a ________.

24) A congested street is ________ in consumption.

26) Which of the following correctly completes the following table?

High Excludability Low Excludability

A) x = Public Good; y = Private Good; z = Common Pool Resource; w = Club Good

29) The free-rider problem may arise in the case of ________.

30) Which of the following is likely to have a free-rider problem?

Homeowner 1's Homeowner 2's Homeowner 3's

41) Why do people refuse to pay for public goods?

Frank's demand: qFrank = 200 - p,