Which type of good does the government typically sponsor because it contributes to the good of society and the economy?

• A. Luxury goods
• B. Inferior goods
• C. Private goods
• D. Public goods

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of different types of goods: Luxury goods are high-end products consumed by wealthier individuals; Inferior goods are those for which demand decreases as income rises; Private goods are excludable and rivalrous, meaning consumption by one person reduces availability for others.
2. Recall the definition of public goods: they are non-excludable and non-rivalrous, meaning no one can be effectively excluded from using them, and one person's use does not reduce availability to others.
3. Recognize that because public goods provide widespread benefits to society and the economy, private markets often underprovide them due to the free-rider problem.
4. Understand that governments typically sponsor or provide public goods to ensure they are available to everyone, as these goods contribute positively to social welfare and economic efficiency.
5. Conclude that among the options given, the government typically sponsors public goods because of their unique characteristics and societal benefits.