The market tends to underproduce public goods because
A. The consumption of a public good by one person prevents the consumption of the same good by another person.
B. It is difficult to measure the benefit of a public good such as national defense.
C. The free-rider dilemma results in exclusive consumption of a good.
D. Joint consumption allows those who do not pay for the good to still benefit from the good.
Answer: D
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Which of the following would result in an increase in the demand for Toyota automobiles?
A. An increase in the price of Toyota automobiles B. A decrease in the price of Toyota automobiles C. A decrease in the price of Honda automobiles D. An increase in the price of Honda automobiles
Which of the following statements about the effects of an increase in government purchases is most accurate?
a. In the classical model, it will cause complete crowding out. In the short-run macro model, crowding out will be incomplete. b. In the classical model, it will cause incomplete crowding out. In the short-run macro model, crowding out will be complete. c. Crowding out will be complete in both the classical and short-run macro model. d. Crowding out will be incomplete in both the classical and short-run macro model. e. In the classical model, the increase in government spending will lead to a decrease in investment spending and autonomous consumption. In the short-run macro model, it will not.
Other things equal, increased emphasis on providing the best possible medical care for all, regardless of income, will:
A. increase the demand for health care. B. increase the supply of health care. C. have no effect. D. decrease the demand for health care.
In Figure 2.1, Box 3 would be labeled
A. S for supply. B. D for demand. C. P for price. D. P* for equilibrium price.