Multiple Choice
Texas is often characterized as a 'low tax, low social service' state. This is a consequence of:
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8. The Types of Goods
Public Goods: Demand Curve and Optimal Quantity
Multiple Choice
Why are national defense and street lighting considered public goods?
A
Because they are costly to provide and therefore must be supplied by the government and paid for through taxes.
B
Because they are natural monopolies where average costs fall as the scale of provision increases.
C
Because they generate positive externalities, so private markets would underprovide them unless corrected.
D
Because they are nonrivalrous and nonexcludable: one person's use does not reduce others' benefits and people cannot be excluded from benefiting.
Verified step by step guidance1
Step 1: Understand the definition of a public good. A public good is characterized by two main properties: nonrivalry and nonexcludability.
Step 2: Define nonrivalry. This means that one person's consumption of the good does not reduce the amount available for others. For example, when one person benefits from street lighting, it does not diminish the light available to others.
Step 3: Define nonexcludability. This means that it is not possible to prevent people from benefiting from the good once it is provided. For instance, once national defense is provided, everyone in the country benefits regardless of whether they pay for it or not.
Step 4: Apply these concepts to national defense and street lighting. Both are nonrivalrous because one person's use does not reduce availability for others, and nonexcludable because it is difficult or impossible to exclude anyone from benefiting.
Step 5: Conclude that because of these two properties, national defense and street lighting are considered public goods, which often leads to government provision since private markets may underprovide them.
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