What is the Tiebout hypothesis?
What will be an ideal response?
The Tiebout hypothesis suggests that an efficient mix of public goods is produced when local land or housing prices and taxes come to reflect consumer preferences just as they do in the market for private goods.
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If people expect to have the profits from correct decisions confiscated but do not expect to be compensated for the losses from incorrect decisions, they will
A) attempt to maximize risk. B) only make choices when the outcomes are absolutely certain. C) try to do what most others are doing. D) undertake longer-range projects more frequently.
The time-inconsistency problem with monetary policy tells us that, if policymakers use discretionary policy, there is a higher probability that the ________ will be higher, compared to policy makers following a behavior rule
A) inflation rate B) unemployment rate C) interest rate D) foreign exchange rate
The idea that firms retain some workers in a recession, whom they would otherwise lay off, to avoid the costs of hiring and training, is called
A) the gift exchange motive. B) worker pooling. C) labor hoarding. D) union busting.
Explain why the rise in the price of a fixed basket of goods tends to overstate the rise in a consumer's true cost of living