Samuelson's Theory of Public Expenditure Demonstrates That

question 216

Multiple Choice

Samuelson's theory of public expenditure demonstrates that

• A) government is inefficient and will always engage in too much spending.
• B) an optimal (or most efficient) level of output exists for every public good.
• C) an efficient mix of public goods is produced when local land/housing prices and taxes come to reflect consumer preferences.
• D) through government regulation of private industry, the optimal level of public good provision is achieved.

---

Definitions:

Net Income

The amount of earnings remaining after all expenses, taxes, and costs have been subtracted from total revenue.

Transfer Price

The price at which goods or services are transferred between departments or subsidiaries within the same company, used for accounting and tax purposes.

Operating Income

Earnings before interest and taxes (EBIT), calculated as gross income minus operating expenses.

Variable Cost

A variable cost varies directly with the level of production or sales volume, such as materials and labor costs.