Wednesday, January 18, 2017

2012 Multiple Choice (Public Goods)

2012 Multiple Choice (Public Goods)

Answer - (D) National Defense

Understand: public good - An item whose consumption is not decided by the individual consumer but by the society as a whole, and which is financed by taxation.

A public good (or service) may be consumed without reducing the amount available for others, and cannot be withheld from those who do not pay for it. 

From the Market Failure cheat sheet here.

One more thing - often the questions ask about the marginal cost of public goods.
The marginal cost of a public good is zero.
Adding one more person to our National Defense is zero.

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