The market tends to underproduce public goods because
A. The free-rider dilemma results in exclusive consumption of a good.
B. The consumption of a public good by one person prevents the consumption of the same good by another person.
C. Joint consumption allows those who do not pay for the good to still benefit from the good.
D. It is difficult to measure the benefit of a public good such as national defense.
Answer: C
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When the Fed buys federal government securities on the open market from commercial banks, over time, the:
A. assets of these banks fall. B. liabilities of the bank fall. C. assets of the banks rise. D. liabilities of the bank rise.
Since there are long waiting lists for tickets to events that regularly occur (Duke basketball, the August NASCAR race in Bristol, Tennessee, etc.), a profit-maximizing promoter would
A. raise ticket prices. B. eliminate seating. C. lower ticket prices. D. eliminate the event altogether.
For each of the following changes, explain what will happen to the expected marginal product of capital curve or the user cost of capital curve, and what will happen to the desired capital stock:
a. The real price of capital goods increases. b. The depreciation rate increases. c. The corporate income tax rate decreases. d. The real interest rate decreases. e. Expected future output decreases.
The logic of control variables in IV regressions
A) parallels the logic of control variables in OLS B) only applies in the case of homoskedastic errors in the first stage of two stage least squares estimation C) is different in a substantial way from the logic of control variables in OLS since there are two stages in estimation D) implies that the TSLS is efficient