What is the free-rider problem, and how is it related to public goods?
What will be an ideal response?
The free-rider problem arises from the exclusion principle. Since no one can be excluded from the benefits of a public good, even if they don't contribute towards paying for the good, people have an incentive to let other people pay for the good and to not contribute themselves. If everyone free rides, the good will not get produced. Hence, public goods usually are provided by the government and paid for by taxes.
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How does economies of scale improve second-degree price discrimination?
A. Firms have increasing opportunity costs and therefore must sell more goods at higher prices to make up the extra costs. B. ATC decreases and then increases which affects the cost to firms. C. People have increasing marginal benefit as ATC decreases. D. ATC decreases as output increases which allows a firm to charge lower prices at different output levels.
If the consumption function is C = 25 + 0.9y and income increases by $100, then autonomous consumption spending will be
A) $10. B) $25. C) $90. D) $115.
Your accountant tells you that if you can continue to earn the current interest rate on your balance of $500 for ten years, you will have about $983.58 . If your accountant is correct, what is the current rate of interest?
a. 5 percent b. 6 percent c. 7 percent d. 8 percent
Presenting options in a fashion that makes people more likely to make one choice over another is called:
A. choice architecture. B. the ACE model. C. traditional economics D. natural experiments.