Directions: There are 10 questions in this part of the test. Read the passage through. Then, go back and choose one suitable word or phrase marked A, B, C, or D for each blank in the passage. Mark the corresponding letter of the word or phrase you have chosen with a single bar across square brackets on your Machine-scoring Answer Sheet.
Public goods are those commodities from whose enjoyment nobody can be 1 excluded. Everybody is free to 2 the benefits of these commodities, and one person’s utilization 3 the possibilities of anybody else’s enjoying the same goods.
Examples of public goods are not 4 one might expect. A flood control dam is a public goods. Once the dam is built, all the people living in the area will benefit 5 their own contribution to the construction cost of the dam. The same 6 true for highway signs or aids to navigations. Once a lighthouse is built, no ship of any nationality can be effectively excluded from the 7 the lighthouse for navigational purposes. National defense is another example. Even a person who voted against military expenditures or 8 taxes will benefit from the protection afforded.
It is no easy task to determine the social costs and social benefits associated with a public good. There is no practicable way of 9 drivers for 100 at highway signs, sailors for watching a lighthouse, and citizens for the security provided to them through national defense. 10 the market does not provide the necessary signals, economic analysis has to be substituted for the impersonal judgment of the market place.