Classify each of the following goods on the basis of the characteristics of excludability and rivalry in consumption giving appropriate reasons: a) A lighthouse b) A pair of shoes c) A paid Web site d) A congested non-toll road
What will be an ideal response?
a) A lighthouse is non-excludable in consumption because nobody can be prevented from using it. It is also non-rival in consumption because its use by one person will not reduce the quantity available to others.
b) A pair of shoes is excludable in consumption because anybody who does not pay for it can be prevented from using it. It is also rival in consumption because it can be used by only one person at a time.
c) A paid Web site is excludable but non-rival in consumption because anybody who does not pay for its use can be prevented from using it but its use by one person will not restrict its use by others.
d) A congested road is non-excludable but rival in consumption because even though nobody can be excluded from its use, its use by one individual will reduce the space available for others.
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The tools of the Federal Reserve include
A) reserve requirements. B) the discount rate. C) open market operations. D) all of these choices.
The basic difference between a tariff and quota is that:
a. quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. b. quota yields revenue to the government whereas tariff does not yield any revenue. c. tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. d. tariff is a quantitative restriction on imports whereas quota is an import duty. e. a tariff raises the price of the product only in the domestic market whereas with a quota, both domestic and foreign producers receive a higher price.