Explain the term "free riders."
What will be an ideal response?
Free riders are people who don't contribute but still benefit from the actions that others undertake. Sometimes people pursue their own private interests and don't contribute voluntarily to the public interest, and this causes free riding. For example, a free rider may avoid paying taxes but enjoy the same benefits enjoyed by tax payers.
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Which of the following is not a limitation of the Pareto criteria?
a. Almost any policy change will make at least one person worse off. b. The status quo is lent legitimacy from being the starting point for evaluating social welfare. c. The criteria cannot tell us if a particular policy change will make all participants better off. d. The criteria do not allow for the ranking of all possible states of the world.
In the 2007-2009 period, the expenditure level in the United States intersected the 45-degree line below potential GDP, causing
a. hyperinflation. b. a growing trade deficit. c. a government budget surplus. d. unemployment.