Government financing of a public good with taxes:

Question

Quizplus · Accepted Answer

Government financing of a public good with taxes can lead to a more efficient allocation of resources compared to private markets because public goods are non-excludable and non-rivalrous, meaning they can be consumed by everyone regardless of who pays for them. This characteristic often leads to under-provision in private markets, as individuals may not have the incentive to pay for a good they can use without contributing to its cost. Government intervention through taxation can help overcome this market failure by ensuring that public goods are provided at a level closer to what society desires, thus achieving a more efficient allocation of resources.

Government Financing of a Public Good with Taxes