Why is it difficult for the market to deliver socially efficient quantities of goods like clean air or street lighting?

What will be an ideal response?


Goods like clean air and street lighting are public goods. This means that individuals can consume these goods even without paying for them as they are non-rival and non-excludable. Such goods present particular problems for markets to provide because consumers have an incentive to act as free-riders; they can consume public goods even if they do not pay for them. Therefore, the problem with efficiently providing public goods is that consumers aren't willing to pay for them because no one can be excluded from consuming them once they are provided.

Economics

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Actions that allow oligopoly firms to coordinate their pricing behavior without explicit collusion are referred to as _____

a. strategic behavior b. differential pricing strategies c. facilitating practices d. duopoly price discrimination mechanisms e. independent practices

Economics

Which of the following would be an economic explanation of how "99ยข pricing" was developed?

a. It was a sales gimmick that sellers used to try to fool their customers. b. It was encouraged by a penny newspaper to increase the number of pennies in circulation. c. It was a scheme to let firms advertise that their prices were under some round dollar figure. d. It was a way of ensuring that sales were recorded on cash registers, thus reducing employee theft.

Economics

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

a. more like a consumption tax and so more like the tax system of many European countries. b. more like a consumption tax and so less like the tax system of many European countries. c. less like a consumption tax and so more like the tax system of many European countries. d. less like a consumption tax and so less like the tax system of many European countries.

Economics

Based on our understanding of the model presented in Chapter 3, we know that an increase in c1 (where C = c0 + c1YD) will cause

A) the ZZ line to become steeper and a given change in autonomous consumption (c0 ) to have a smaller effect on output. B) the ZZ line to become steeper and a given change in autonomous consumption (c0 ) to have a larger effect on output. C) the ZZ line to become flatter and a given change in autonomous consumption (c0 ) to have a smaller effect on output. D) the ZZ line to become flatter and a given change in autonomous consumption (c0 ) to have a larger effect on output.

Economics