Are there any types of market failure that result in the underproduction of a good? Explain
Yes. There are two. Underproduction occurs when there is a positive externality associated with production
of a good. It also occurs when a public good exists. There are free riders in the markets for both of these
types of goods, whose preferences for the good will not be considered by the market.
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Many government programs, such as unemployment compensation, operate on a deficit during recessions and a surplus during periods of economic expansion. The programs are referred to as
A) discretionary fiscal policy. B) automatic stabilizers. C) Ricardian equivalence. D) Recognition time lag.
As workforces become more educated in countries with comparative advantage in labor-intensive products, the comparative advantage for the production of those labor-intensive goods shifts:
A. toward other countries with less cheap labor relative to the other factors of production. B. away from countries with more cheap labor relative to other factors of production. C. toward other countries with more cheap labor relative to the other factors of production. D. toward countries with more capital for production.