In the context of both positive externalities and public goods, briefly explain why private firms or individuals might fail to make expenditures or investments that would produce broad social benefits.
What will be an ideal response?
Answer: With regard to both positive externalities and public goods, private firms or individuals acting may fail to make an expenditure or investment that would produce broad social benefits, because the private benefits of such expenditure will be substantially less than the social benefits.
You might also like to view...
A fiscal stimulus works to close a recessionary gap by shifting the
A) AD curve leftward. B) AS curve leftward. C) AD curve leftward and AS curve leftward. D) AD curve rightward. E) potential GDP line leftward.
All of the following are characteristics of an oligopoly EXCEPT
A) diseconomies of scale over all ranges of output. B) small number of firms. C) high barriers to entry. D) interdependence.
The market basket approach:
A. gives us a single number that represents how changing prices affect the typical consumer. B. gives us a list of what the typical consumer buys and the average price change of those goods. C. tells us how the prices of all goods and services in an economy change over time. D. tells us exactly how people change what they buy from year to year.
Assume a two-country, two-commodity, two-input model where the following relationships hold:(K/L)U.S. > (K/L)ROW (K/L)automobiles > (K/L)shoes (K/L)U.S. is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L)shoes indicates the capital-labor ratio in the production of shoes.Assume further that technology and tastes are the same in the United States and the Rest of the World. The relationships shown in here indicate that the United States has a comparative advantage in the production of ________ while the Rest of the World has a comparative advantage in the production of
A. neither shoes nor automobiles; both goods B. shoes; automobiles C. automobiles; shoes D. both the goods; neither shoes nor automobiles