You have read that the free rider problem affects equilibrium in a public good context. Explain how this situation can be modeled as a prisoner's dilemma game.
What will be an ideal response?
Each individual will say before construction that he will tell the truth about his preferences. It
would be in each person's interest to lie about his true preferences, which would allow him to enjoy a higher level of public good without paying for it completely.
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An export subsidy is
A) a payment to a firm or individual that ships a good abroad. B) a fee that is charged to a country that ships goods to the U.S. C) a payment made to a foreign government in return for preferential trade treatment. D) illegal in the U.S. but is fairly common in the rest of the world. E) a limit on the quantity of a good or service that can be sold abroad.
Which of the following is true?
a. Keynesians argue that the crowding-out effect is rather insignificant. b. Keynesians advocate increasing the money supply during economic recessions but decreasing the money supply during economic expansions. c. Monetarists argue that the crowding-out effect is rather large. d. Monetarists advocate increasing the money supply by a constant rate year after year. e. All of the answers are correct.