Which of the following is a benefit of increasing economic interdependence in the context of public goods?

• A. It allows for more efficient provision of public goods through shared resources.
• B. It reduces the need for government intervention in all markets.
• C. It ensures that all individuals have identical demand curves for public goods.
• D. It eliminates the free-rider problem entirely.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of economic interdependence, which refers to the mutual reliance between individuals, firms, or countries in economic activities, especially in the provision and consumption of goods and services.
2. Step 2: Recall the characteristics of public goods: they are non-excludable and non-rivalrous, meaning that one person's consumption does not reduce availability to others, and it is difficult to exclude anyone from using them.
3. Step 3: Recognize that increasing economic interdependence can lead to pooling of resources and cooperation among different agents, which can improve the efficiency of providing public goods by sharing costs and benefits.
4. Step 4: Evaluate the options given: increasing interdependence does not necessarily reduce government intervention in all markets, nor does it ensure identical demand curves or completely eliminate the free-rider problem.
5. Step 5: Conclude that the main benefit of increasing economic interdependence in the context of public goods is that it allows for more efficient provision through shared resources, as cooperation helps overcome some challenges inherent in public goods provision.