Question

1.

When economists say that a good is non-rival in consumption, they mean that:

Group of answer choices

no one wants the good.

everyone wants the good.

the good is widely available.

more than one person can enjoy the good at the same time.

2.

Private goods are:

Group of answer choices

rival in consumption and their benefits are nonexcludable.

nonrival in consumption and their benefits are excludable.

nonrival in consumption and their benefits are nonexcludable.

rival in consumption and their benefits are excludable.

3.

The free-rider problem occurs for:

Group of answer choices

private goods and public goods.

private goods but not public goods.

public goods but not private goods.

neither public nor private goods.

4.

If the price of output increases, the marginal revenue product curve will shift ________ and the profit maximizing quantity of labor demanded will ________.

Group of answer choices

up; increase

up; decrease

down; increase

down; decrease

5. The input-substitution effect of an increase in the wage comes about because higher wages:

Group of answer choices

increase production costs, and final good prices will rise, reducing the quantity demanded of the product.

increase production costs, and final good prices will rise, increasing the quantity demanded of the product.

make labor less expensive as an input, leading firms to switch to labor as an input.

make labor more expensive as an input, leading firms to switch to other inputs.

Answer 1

Answer-1. Correct option is 'd'

When economists say that a good is non-rival in consumption, they mean that more than one person can enjoy the good at the same time. Non-rival goods may be consumed by one consumer without preventing simultaneous consumption by others. An examples of non-rival goods include a beautiful scenic view, national defense, clean air, street lights, and public safety.

Answer-2. Correct option is 'd'

Private goods are rival in consumption and their benefits are excludable. Private goods are excludable and rival. A good is rivalrous if one prson consume it 'use it up' meaning someone else cannot consume it. A good is excludable if you can prevent somebody from using it.

Answer-3. Correct option is 'c'

The free-rider problem occurs for public goods but not private goods. Free-rider problem occurs when people can benefit from a good/service without paying anything towards it. The free-rider problem is common with public goods, goods with non-excludable benefit, e.g. if you reduce polution, everyone society will benefit.

Answer-4. Correct option is 'a'

If the price of output increases, the marginal revenue product curve will shift up and the profit maximizing quantity of labor demanded will increase. Marginal revenue (MR) is the additional revenue that will be generated by increasing product sales by one unit. Increase the price of the output will increase the marginal revenue product and this will also increase the demand of labor.

Answer-5. Correct option is 'a'

The input-substitution effect of an increase in the wage comes about because higher wages increase production costs, and final good prices will rise, reducing the quantity demanded of the product.