A . What is a free rider and when do we see free riding? b. Why doesn't the market calculate the costs and benefits that accrue to free riders?
a . A free rider is someone who gets the benefits from the provision of a good without paying for it. We
see free riding occur with public goods and with goods that have positive externalities associated with
them.
b. The market only considers the costs to and benefits for market participants, that is, the buyers and
sellers. Free riders are strictly third party beneficiaries, and so their benefits are not considered by
market participants.
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The Coase Theorem works best when who owns the property rights?
A. consumers B. government C. does not matter D. producers
The multiplier for government spending is the same as the
A) multiplier for autonomous consumption. B) marginal propensity to save. C) marginal propensity to import. D) tax multiplier.
When new firms are encouraged to enter a monopolistically competitive market
A) some existing firms must be earning economic profits. B) the demand curve facing an existing firm shifts to the right. C) they do so because there is insufficient product differentiation. D) the marginal cost curve facing an existing firm shifts downwards.
A system of managed floating exchange rates is
A) a system in which governments may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. B) a system in which governments use flexible exchange rates. C) a system in which governments are forbidden from attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. D) a system in which governments need to reach a prior agreement among them before they may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed. E) a system in which governments use extensive fiscal policy to discourage exchange rate movements.