The free rider problem occurs because:
a. it is easy to exclude others from consuming a good.
b. consumption is rivalrous, so the consumption of a product by one individual diminishes the amount available for others.
c. exclusion is costly or impossible, so a consumer or producer can use a good without having to pay for it.
d. external costs are imposed on others not directly involved in the transaction.
e. individuals are not required to pay for those goods which do not yield any utility to them.
c
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For the following questions assume the following facts:
(1 ) Balance of Payments = 0 prior to the transactions. (2 ) Person A (who lives in the United States) purchases an airplane from British Airways for $150,000. (3 ) Person A pays with a check from his account at First Union Bank in the United States. (4 ) British airways, since it will need dollars in 1 month, deposits the check at the Bank of England. (5 ) Bank of England deposits the $150,000 at Commonwealth bank, which is located in the United States. Due to the transactions above, what are the effects on the reserve at the Fed? A) Fact 2 is a decrease of $150,000, fact 5 is a decrease of $150,000, a net effect of -$300,000. B) Fact 3 is a decrease of $150,000, fact 5 is an increase of $150,000, a net effect of 0. C) Fact 3 is an increase of $150,000, fact 5 is a decrease of $150,000, a net effect of 0. D) Both fact 3 and fact 5 result in increases of $150,000, a net effect of +$300,000. E) Both fact 3 and fact 5 result in decrease of $150,000, a net effect of -$300,000.
An indirect flow of funds occurs when
A) funds flow from saver-lenders to borrower-spenders through financial intermediaries. B) funds flow from saver-lenders to borrower-spenders through financial markets. C) funds flow to saver-lenders from borrower-spenders through financial intermediaries. D) funds flow to saver-lenders from borrower-spenders through financial markets.