Because of the free-rider problem:
A. the market demand for a public good is overstated.
B. the market demand for a public good is nonexistent or understated.
C. government has increasingly yielded to the private sector in producing public goods.
D. public goods often create serious negative externalities.
Answer: B
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In the aggregate expenditures model, consumption depends on
A. disposable income. B. the natural rate of unemployment. C. whether the government has a budget surplus or deficit. D. potential output.
When the production of a good results in a positive externality, the social value curve is
a. below the demand curve, indicating that the total value to society is less than the private benefit. b. above the demand curve, indicating that the total value to society is greater than the private benefit. c. identical to the demand curve, indicating that the total cost to society is the equal to the private benefit. d. above the supply curve, indicating that the total cost to society exceeds the private cost.
Refer to Figure 5-16. Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other
Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved? A) The optimal quantity will be installed only if Bree pays for the entire installation cost. B) The optimal quantity will be installed only if the two parties agree to pay according to their willingness to pay as indicated by their respective demand curves. C) Because there are only two consumers, it is likely that private bargaining will result in the optimal quantity being installed. D) The optimal quantity will be installed only if the two parties split the cost of installation equally.
For most consumers, the process of learning about the efficiency and durability of various brands of refrigerators can be considered
a. irrational b. unproductive c. a vocation d. nonmarket work e. costless