Which of the Following Is a Valid Reason for Government

question 56

Multiple Choice

Which of the following is a valid reason for government provision rather than market provision of certain economic goods and services?

• A) When the government provides economic goods, they are free; costs are only incurred when such goods are provided by private firms.
• B) Voters tend to be better informed than market consumers.
• C) Decision makers in the market are motivated by self-interest, whereas, political decision makers are primarily motivated by the desire to help others.
• D) Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers, while the government can use taxes to overcome this problem.

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Definitions:

Net Operating Income

A company's income after operating expenses have been subtracted but before income taxes and interest are deducted.

Initial Investment

The amount of money used to start a project, purchase an asset, or initiate operations in a business.

Salvage Value

The projected sell-on value of a property when it reaches the end of its operational lifespan.

Internal Rate

Often referred to as Internal Rate of Return (IRR), it is the discount rate that makes the net present value of all cash flows from a particular project equal to zero.