Econ 2 Assignment 1 Exam Questions (39 Terms) With Verified Definitions Updated 2024

When a free-rider problem exists, A. the market will devote too few resources to the production of the good. B. the cost of the good will always be more than the benefit of the good. C. the good will not be produced. D. entrepreneurs will eventually find a way to make free-riders pay their share. {Ans: A. the market will devote too few resources to the production of the good.}National defense is a classic example of a public good because A. it is difficult to exclude people from receiving the benefits from national defense once it is provided. B. everyone agrees that some level of national defense is important, but only the government knows the optimal amount. C. there is no market for private security services. D. there are no private firms willing to supply defense goods such as tanks and weapons. {Ans: A. it is difficult to exclude people from receiving the benefits from national defense once it is provided.}Pollution is a negative externality, but it is not appropriate to view the problem of pollution as a common-resource problem. a. TRUE b. FALSE {Ans: b. FALSE}Government intervention cannot improve the allocation of resources for goods that