Under Democratic Representative Government, Spending on a Government Program Will

question 44

Multiple Choice

Under democratic representative government, spending on a government program will likely be larger than the amount consistent with economic efficiency when

• A) tax costs are levied in direct proportion with the benefits received.
• B) both the costs and benefits are widespread among the voters.
• C) benefits of the program are highly concentrated, while the costs are widely dispersed among voters.
• D) costs of the program are highly concentrated, while the benefits are widely dispersed among voters.

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Definitions:

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment by comparing the present value of its cash inflows to the present value of its cash outflows.

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.

Discount Rate

The interest rate used to determine the present value of future cash flows, guiding investment and financing decisions by reflecting the opportunity cost of capital.