Assuming that everyone prefers to live in a society without poverty, which of the following statements are true of private anti-poverty programs?
(i) people who don't contribute still receive benefits from the general reduction in poverty
(ii) the socially optimal level of charitable donations is greater than those actually received, because of the free-rider problem
(iii) there is no individual incentive to contribute to private anti-poverty programs since the government is the sole supplier
A)(i) and (ii)
B)(i) and (iii)
C)(ii) and (iii)
D)(i), (ii) and (iii)

Question

Quizplus · Accepted Answer

(i) is true because non-contributors can still benefit from the overall reduction in poverty due to the positive externalities of such programs. (ii) is true because of the free-rider problem, where individuals may under-contribute to a public good (like anti-poverty programs) since they can benefit without paying. (iii) is false because private anti-poverty programs exist alongside government efforts, meaning individuals do have an incentive to contribute to these private initiatives.

Assuming That Everyone Prefers to Live in a Society Without