Which of the following statements might be used by an economist to argue that the government, rather than the market, should finance the provision of certain economic goods and services?
A) 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).
B) Public goods tend to be undersupplied by private business because of nonpaying consumers; the government can use taxes to overcome this problem of non-payment.
C) When the government provides economic goods, they are free; costs are incurred when such goods are provided by private firms.
D) Voters tend to be better informed than market consumers are.

Question

Quizplus · Accepted Answer

This statement highlights the market failure associated with public goods, which are non-excludable and non-rivalrous. Private firms may under-supply such goods due to the free-rider problem, which can be addressed through government financing.

Which of the Following Statements Might Be Used by an Economist