The free-rider problem with a public good leads to
A) inefficiency if the good is provided by only private markets with no government action.
B) overproduction if the good is provided by private markets.
C) underproduction if the good is provided by the government.
D) None of the above answers is correct.
A
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A risk-averse manager is hired to run a firm for shareholders. If shareholders cannot observe the manager's effort, which would be the best employment contract?
a. a high-powered incentive contract to elicit maximum effort. b. a fixed salary. c. a moderately powered incentive scheme that elicits some effort without exposing the manager to too much risk. d. an incentive scheme that provides maximum incentives and maximum insurance.
If M = 200, P = 100, and Q = 10, then V is:
a. 20. b. 2. c. 10. d. 5. e. 2,000.