Public Finance and Public Choice

Read this chapter to learn how the government provides goods and services in the economy to alleviate problems of the market system.

2. The Role of Government in a Market Economy

2.2. Answers to Try It! Problems

  1. This is an attempt to deal with monopoly, so it is a response to imperfect competition.
  2. Cigarette consumption may result from an irrational decision.
  3. Protecting the earth from such a calamity is an example of a public good.
  4. Food Stamps are a means-tested program to redistribute income.
  5. Social Security is an example of a non-means-tested income redistribution program.
  6. This is a response to external costs.
  7. This is a response to monopoly, so it falls under the imperfect competition heading.