Which of the following statements is TRUE?
I. In order for society to have a sufficient level of national defense, the government must tax the public to raise funds for a standing army.
II. For every 100 people that use a public good, approximately 500 people are prevented from using it.
III. People do not have an incentive to voluntarily pay for nonexcludable goods.
A) I and II only
B) III only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

I is true because a standing army is a public good that cannot be provided through market exchange, and therefore requires government funding through taxation.

III is true because nonexcludable goods, such as national defense or clean air, cannot exclude non-payers from benefiting from them, leading to a free-rider problem where individuals are incentivized to not pay for the good but still benefit from it.

II is false because it is not a universal truth and depends on the specific public good in question. Some public goods may have a larger exclusion margin than others.

Which of the Following Statements Is TRUE