Explain why public goods can be classified as market failure? Explain what problem arises when public goods are produced?
What will be an ideal response?
When the market fails to provide certain goods and services, there is a clear case for government intervention. If left to the free market mechanism, no public goods would be provided and, as a result, there would be a clear market failure. Public goods can be used by one person without reducing availability of the good for consumption by others (non-rival) at no additional cost and once the good is produced, it is usually impossible, or at the very least difficult, to exclude anyone from consuming it (non-excludable). Due to these results, consumers can take advantage of public goods without contributing sufficiently to their creation. This is called the free rider problem.
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Which of the following statements is false?
A) A bank's assets are its uses of funds. B) A bank issues liabilities to acquire funds. C) The bank's assets provide the bank with income. D) Bank capital is recorded as an asset on the bank balance sheet.
Suppose the firm's total revenue is $4,000 and its total cost is $1,200 . We know, then, that the firm
a. should produce more to maximize profit b. should lower its price to maximize profit c. should lower average total cost to maximize profit d. should stay where it is because it's maximizing profit e. can't determine what it should do with that incomplete information