When government employ cost-benefit analysis to help them decide whether to provide a public good, measuring benefits is difficult because ?
Correct answer: D. respondents to naires have little incentive to tell the truth.
- A. there are no benefits to the public since a public good is not excludable
- B. the benefits are infinite because a public good is not rival and an infinite amount of people can consume it at the same time
- C. one can never place a value on human life or the environment
- D. respondents to naires have little incentive to tell the truth.
Explanation
People may understate their willingness to pay for a public good because they can benefit without paying, creating a free-rider incentive. This makes truthful survey responses difficult and complicates cost-benefit analysis.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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