Why Would It Be Inefficient for the Government to Charge

question 39

Multiple Choice

Why would it be inefficient for the government to charge a price for consuming a public good such as national defence?

• A)Too much defence will be provided.
• B)The price cannot be set to cover all defence costs.
• C)No one will be willing to pay to consume any national defence.
• D)The marginal cost of providing national defence is zero.
• E)Too little national defence will be provided.

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Definitions:

Efficiency Wage

A wage set above the market equilibrium by employers in an effort to enhance productivity, attract higher quality employees, and reduce turnover.

Constant Dollars

A term used to describe a measure of dollars that has been adjusted for inflation, reflecting the real value of money over time.

Nominal Wages

The amount of money paid to employees before adjusting for inflation, representing the face value of earnings.

Real Wage

The purchasing power of wages, taking into account the impact of inflation on buying capabilities.