Explain why a subsidy will not solve the problem of producing less than is socially optimal of a pure public good
Although a subsidy will lower the price of the good, people will still prefer to be free riders, that is, they
prefer to wait until someone else provides the good and then use it for free. A subsidy will not solve the
free-rider problem and so will not correct the problem.
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Technological advancements have led to lower prices and an increase in the sale of digital cameras. How does this affect the digital photo printing paper market?
A) The demand curve for digital photo printing paper shifts to the left. B) The supply curve for digital photo printing paper shifts to the left. C) The supply curve for digital photo printing paper shifts to the right. D) The demand curve for digital photo printing paper shifts to the right.
A point inside a production possibilities curve indicates
A) resources are not being used efficiently. B) resources are being used very efficiently. C) opportunity costs are constant. D) an output combination that is unobtainable with the current resource and technology levels