Question

QUESTION 8

If large numbers of individuals choose to behave as free riders, ________.

	a.	public goods will quickly be privatized
	b.	more of the public good will be available for paying riders
	c.	the public good may never be provided

10 points   

QUESTION 9

A number of different government policies can increase the incentive to innovate, including:

	a.	patent protection to guarantee intellectual property rights.
	b.	government assistance with the costs of research and development.
	c.	regulations requiring more investment in innovation.

10 points   

QUESTION 10

Which of the following would be classified as a situation where a third party benefits from a market transaction by others?

	a.	Two firms trading pollution credits to avoid cutting their toxic emissions.
	b.	Increased levels of air pollution in neighborhoods near a football stadium.
	c.	City buying 10,000 trees for green-space renewal projects.
	d.	Allowing a mining company to use a natural lake to discharge waste.

question 9 has 2 answers

Answer 1

Ans) 8) Free rider is problem where person enjoys benefit of a good without paying for it. It is commonly seen in public goods as they are non excludable and non rivalrous in nature.

Public goods can only be provided by the government due to existence of free rider problem. They are funded by the tax we pay. If large number of people choose to be free rider, it may not be then possible to provide public goods.

Option c.

9) Government promotes research and development as it is beneficial for country as whole. It encourages it by providing subsidies and patents. Subsidies helps to lower the cost. Patents provide intellectual property rights due to which, firm can charge monopoly prices.

Option a and b.

10) Externality is when the bystander bears the cost or benefit of any activity. It is of two types ÷ positive and negative.

Positive externality is when the bystander bears the benefit of any activity. Eg- education, planting trees etc.

Negative externality is when the bystander bears the cost of any activity. Eg- pollution.

Option c.