There are 3,000 families in a small town that are affected by air pollution from a local factory. The air pollution could be reduced if the company spent $10,000 on upgraded ventilators. The company agrees to install the ventilators if the affected families contribute the $10,000. However, because individuals will benefit from the reduction in air pollution whether they contribute or not, most people will not contribute and the firm will not install the ventilators. This outcome is an example of the
A. drop-in-the-bucket problem.
B. collective action problem (that arises when there are too many parties involved).
C. Coase theorem.
D. free-rider problem.
Answer: D
You might also like to view...
Which of the following is an example of a product that is made available through public provision?
i. local police protection ii. public schools iii. local fire department A) i only B) i and ii C) iii only D) i and iii E) i, ii, and iii
According to the graph shown, if Q2 units are being produced, this monopolist:
This graph shows the cost and revenue curves faced by a monopoly.
A. is not maximizing profits.
B. is producing where marginal costs are less than marginal revenue.
C. is earning negative profits.
D. should increase production.
The assignment of inputs to specific industries by central planners is made difficult by
a. the interdependency among industries. b. lack of data for decision making. c. the danger of a chain reaction among industries if an error is made at any point. d. All of the above are correct.
The Hernandez family is buying a house. They have submitted several offers, and one was finally accepted. The time they spent submitting offers is considered part of the
a. negative spillover b. profit margin c. market price d. transaction cost