There are 1,000 families in a neighborhood that are affected by noise pollution from a local factory. The noise could be reduced if the company spent $5,000 on technological improvements. The company agrees to make these improvements if the affected families contribute the $5,000. However, because individuals will benefit from the reduction in noise whether they contribute or not, most people will not contribute and the firm will not make the improvements. This outcome is an example of the
A. Coase theorem.
B. collective action problem (that arises when there are too many parties involved).
C. free-rider problem.
D. drop-in-the-bucket problem.
Answer: C
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If leisure is a normal good and the economy expands so that national income rises by 3% next year then theoretically what ought to happen to the amount of work that should take place?
What will be an ideal response?
In a market system, the working of the price system only results in the distribution of income.
Answer the following statement true (T) or false (F)
The marginal cost is an important piece of information for firms and economists to know because it
a. determines the size of the plant you should build b. is the only cost that increases as production increases c. helps determine precisely which production level maximizes profit d. incorporates fixed costs into the production decision e. is a measure of labor productivity
Which of the following is an accurate statement about rationality?
a. Rationality is the same for all people. b. Rationality is subjective. c. Rationality yields mostly satisfying results. d. Rationality uses complex formulas.