One answer to the problem of natural monopoly is provision of the good by a government-owned and operated firm. Why is that option not used very often?
We cannot necessarily expect more efficient production from a government firm. There is little personal incentive for managers of such a firm to cut costs or to manage in the interest of the general public rather than for their own professional and personal interests. Rational voter ignorance reduces the ability of voters to understand, monitor, and control the firm. There is no small group of shareholders to gain by taking control and increasing efficiency. Consumers often have good substitutes available for the government monopoly production, so their desires may not be served.
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How does the tax wedge influence potential GDP?
What will be an ideal response?
A policy to do nothing and allow the economy to self-correct or adjust without interference from the federal government is also called a(n) _______________ policy:
a. nonintervention b. active c. stabilization d. fixed rule
The aggregate-demand curve shows the quantity of domestic goods and services that households, firms, the government, and customers abroad want to buy at each price level
a. True b. False Indicate whether the statement is true or false
During the financial crisis of 2008, the unemployment rate
A. fell by less than expected. B. barely changed. C. fell dramatically. D. rose dramatically.