The supply of public goods must be left to government and nonprofit institutions. Why?
What will be an ideal response?
Because nonpaying users usually cannot be excluded from enjoying a public good, suppliers of such goods will find it difficult or impossible to collect fees for the benefits they provide. This is the so-called free-rider problem. Services such as national defense and public health, which are not depletable and where excludability is impossible, cannot be provided by private enterprise because people will not pay for what they can get free. Because private firms are not in the business of giving services away, the supply of public goods must be left to government and nonprofit institutions.
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"In order for Charlie Trotter's, an upscale restaurant in Chicago, to maximize profit from the employment of chefs, the restaurant should hire chefs up to the point where the value of marginal product equals the wage rate for chefs"
Is the statement correct or incorrect?
Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market?
What will be an ideal response?
Returns to scale is a concept that operates
A) only in the short run. B) only in the long run. C) in both the long run and the short run. D) in either the long run or the short run, but never both.
If a local dairy farm sells its ice cream to a distributor and contractually restricts the distributor from reselling the ice cream outside of the south east, this is an example of ________.
A) a tying arrangement B) exclusive dealing C) territorial confinement D) a requirements contract