Why are public goods a source of market failure?
What will be an ideal response?
Public goods will not generally be produced by firms in the private market. For a private profit-making firm to produce a good and make a profit, it must be able to withhold that good from those who do not pay. However, a consumer acting in his own self-interest has no incentive to contribute to the production of public goods. If the social value of the goods is greater than the cost of the resources used to produce them, the production of the goods is efficient. Thus, the private market will fail to achieve the efficient outcome.
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If supporters of restrictions on imports argue that protection is needed to preserve a strategic industry, which of the following is being used?
A) Protecting national culture argument B) Infant-industry argument C) Save domestic jobs argument D) National security argument E) Dumping argument
The value of the resources flowing into firms is precisely the value of the goods and services flowing out of the firms
Indicate whether the statement is true or false
According to the ______, the amount of a good or service wanted varies inversely (negatively) with its price, ceteris paribus.
a. equilibrium quality b. equilibrium quantity c. law of demand d. law of supply
For economic analysis, the short run is considered less than one year.
Answer the following statement true (T) or false (F)