Explain the term "free riders."
What will be an ideal response?
Free riders are people who don't contribute but still benefit from the actions that others undertake. Sometimes people pursue their own private interests and don't contribute voluntarily to the public interest, and this causes free riding. For example, a free rider may avoid paying taxes but enjoy the same benefits enjoyed by tax payers.
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When the government's outlays equal its tax revenue, then the budget
A) is in deficit. B) is in surplus. C) is balanced. D) could be either in surplus or deficit. E) is legal only because expenditures equal tax revenues.
If an industry is dominated by three large producers whose revenues represent 30%, 30%, and 30% of the market's total revenues with the remaining two firms each representing 5%, what would be the four firm concentration ratio and the Herfindahl-Hirschman Index for this industry?
a. 95%; 2,725 b. 95%; 2,750 c. 70%; 9,975 d. 70% 10,000
Assume a one year U.S. bond pays 4.0% interest and a similar U.K. bond pays 5.2% interest. Which of the following changes will establish interest rate parity?
a. The British pound would be expected to appreciate by 1.2% against the U.S. dollar. b. The U.S. dollar would be expected to depreciate by 1.2% against the British pound. c. The British pound would be expected to depreciate by 1.2% against the U.S. dollar. d. The British pound would be expected to appreciate by 9.2% against the U.S. dollar. e. The U.S. dollar would be expected to appreciate by 9.2% against the British pound.
Why are checking account balances included in the M1 definition of the money supply?
A. Checking account balances are a traditional form of money that predates paper money. B. Checking account balances are used to make so many payments. C. Checking account balances are backed by gold and silver. D. Checking account balances pay interest.