Which of the Following Is a Valid Reason for the Government

question 201

Multiple Choice

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

• A)​When the government provides economic goods, they are free; costs are incurred when such goods are provided by private firms.
• B)​Voters tend to be better informed than market consumers are.
• C)​Decision makers in the market sector are motivated by self-interest, whereas political decision makers are primarily motivated by altruism (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; the government can use taxes to overcome this problem of nonpayment.

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Definitions:

Marginal Cost

The supplementary charge triggered by the manufacture of one extra unit of a product or service.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it represents the variable cost per unit of output.

Marginal Cost

The incremental cost associated with the production of an additional unit of a product or service.

Total Costs

The complete expenses incurred in the process of producing or providing goods and services, including both fixed and variable costs.