Multiple Choice
Which of the following is a benefit of increasing economic interdependence in the context of public goods?
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8. The Types of Goods
Public Goods: Demand Curve and Optimal Quantity
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A consumption tax is often used to pay for things everyone gets to enjoy, such as which of the following?
A
National defense
B
Personal computers
C
Designer clothing
D
Private automobiles
Verified step by step guidance1
Understand the concept of a consumption tax: it is a tax on goods and services that people buy and consume, often used to fund public goods or services.
Identify what public goods are: these are goods that are non-excludable and non-rivalrous, meaning everyone can enjoy them without reducing availability to others.
Analyze each option to determine if it is a public good or a private good. National defense is a classic example of a public good because it benefits all citizens regardless of individual payment.
Recognize that personal computers, designer clothing, and private automobiles are private goods because they are excludable and rivalrous—only the purchaser benefits from them.
Conclude that a consumption tax is typically used to fund public goods like national defense, which everyone enjoys collectively.
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