Question

The free-rider problem arises when:

1. a good is nonexcludable

2. goods are nonrival in consumption

3. there is overuse of a common resource

4. the marginal social cost of producing a good exceeds the private marginal cost

Which of the following would be considered a public good?

1. a football staduim

2. a toll bridge

3. national defense

4. a private office building

The government could internalize a positive extrnality of consumption by providing

1. a subsidy

2. a moral hazard

3. a technology spillover

4. an adverse selection

If firms had to pay for the externalities they cause, the supply curve would

1. become inverted

2. shift to the right

3. remain unaffected

4. shift to the left

Answer 1

The free-rider problem arises when:

1. a good is nonexcludable

explanation ; since we cannot exclude the user from the benefits of the good or service, free-rider problem arises

Which of the following would be considered a public good?

3. national defense

National defense is non rival and non-excludable

The government could internalize a positive extrnality of consumption by providing

1. a subsidy

Positive externality - subsidy
Negative externality - tax

If firms had to pay for the externalities they cause, the supply curve would

4. shift to the left

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