A free-rider problem arises whenever: a. goods cannot be ...

[fnuegbu]

A free-rider problem arises whenever:
 a. goods cannot be provided exclusively to those who pay for them.
  b. the price of a good is very low.
 c. the government provides goods or services.
 d. goods cease to be scarce.

Question 2

If all decisions makers had rational expectations and their expectations were correct, would the Phillips curve be vertical or horizontal in the short-run? Explain why.

[Eazy416]

Answer to Question 1

a

Answer to Question 2

If we assume that the all decision makers have rational expectations, the Phillips curve would be vertical in the short run. Under rational expectations all consumers, workers, and producers recognize that higher prices do not actually change their incentives. As a result, they do not change their actions, meaning that we would not expect to see a change in the level of output or unemployment creating a vertical shape for the Phillips curve in the short-run.

[fnuegbu]

Thank you

[Eazy416]

Happy to help you