The supply of public goods must be left to government and nonprofit institutions. Why?
Because nonpaying users usually cannot be excluded from enjoying a public good, suppliers of such goods will find it difficult or impossible to collect fees for the benefits they provide. This is the so-called free-rider problem. Services such as national defense and public health, which are not depletable and where excludability is impossible, cannot be provided by private enterprise because people will not pay for what they can get free. Because private firms are not in the business of giving services away, the supply of public goods must be left to government and nonprofit institutions.
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Voters have an incentive to be rationally ignorant of most political issues because _____
a. all candidates target the median voter b. political information is costly c. they are likely to be canceled out by another uninformed voter d. their vote is highly unlikely to change the outcome
Which of the following is the basic tenet of new classical economics?
a. A change in the fiscal policy affects the equilibrium level of real GDP but has no impact on the equilibrium price level. b. A government-induced shift in aggregate demand affects the real GDP only if they are expected by the economic agents. c. A change in aggregate demand affects the aggregate price level only if the aggregate supply curve is perfectly elastic. d. A change in monetary policy affects the equilibrium level of real GDP only if those changes are unexpected. e. An expected change in a monetary or fiscal policy leads to a proportional shift of the long run supply curve.