If the Marginal Cost of a Given Level of a Public

question 78

Multiple Choice

If the marginal cost of a given level of a public good exceeds the marginal benefit,then

• A) voters will be happy with the quantity of the public good.
• B) tax revenues will need to be increased.
• C) government needs to educate voters about the benefits of the public good.
• D) less of the public good needs to be provided.
• E) government needs to reduce excess spending.

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Definitions:

Capital Rationing

The act of placing restrictions on the amount of new investments or projects a company may undertake, often due to limited resources such as capital.

Present Value Concepts

The idea that an amount of money today is worth more than the same amount in the future due to its potential earning capacity, often calculated through discounting future cash flows.

Capital Investment Proposal

A formal request or plan for spending on large-scale projects or purchases, intended to improve a company's assets or operations.

Internal Rate of Return Method

A financial metric used to evaluate the profitability of potential investments, calculating the discount rate that makes the net present value of all cash flows from a particular project equal to zero.