Why might firms in the defense industry invest large amounts of money in lobbyists with respect to public goods like national defense?

• A. To influence government spending decisions and ensure higher provision of national defense, which benefits them as suppliers.
• B. To decrease the demand for public goods and increase private market competition.
• C. To privatize national defense and exclude non-payers from its benefits.
• D. To reduce the free-rider problem associated with national defense.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the nature of public goods, such as national defense, which are non-excludable and non-rivalrous, meaning that individuals cannot be excluded from their benefits and one person's consumption does not reduce availability to others.
2. Step 2: Recognize that because public goods are typically provided by the government, firms that supply related products or services (like defense contractors) have a vested interest in the level of government spending on these goods.
3. Step 3: Analyze why firms might invest in lobbyists: lobbying is a strategic activity aimed at influencing government decisions, particularly budget allocations and policies that affect the provision of public goods.
4. Step 4: Connect the firm's goal to increase government spending on national defense with their investment in lobbyists, as higher government spending translates into more contracts and revenue for these firms.
5. Step 5: Conclude that the primary reason firms invest in lobbyists is to influence government spending decisions to ensure a higher provision of national defense, which directly benefits them as suppliers, rather than to decrease demand, privatize the good, or address the free-rider problem.