Problem

Can a company be guaranteed all of the social ben…

00:45

Problem 16 Medium Difficulty

Explain why the federal government funds national defense.

Answer

Externality is impact on the third-party who is not related to the transaction but is effect by that
transaction happening between two parties. A positive externality spreads the benefit to others as
well like innovation, etc. Public goods are those goods which are both non-rival and
nonexcludable.
Public goods are non-rival i.e. when a good is consumed by one then it does not reduce the
chances of other to consume it, and nonexcludable i.e. it is not possible to exclude person from
using the good if he is not paying for it. Defense is example of such public good but government
prefers to spend money on this because it is a necessary service and no individual will take
responsibility of it if it is left in public hands, so they find it better to collect tax and then manage
national defense.

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Principles of Microeconomics for AP® Courses

Chapter 13

Positive Externalities and Public Goods

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Video Transcript

everyone said they were solving problem number 16 from Chapter 13 which asks us to explain why the federal government and only the butter off funds national. So first off, we're gonna have to identify. National defense has either. Publicly, a national defense is going to be a public. And remember the two defining characteristics of any public that are not their non excludable. It seems it's very positive costume or impossible to exclude others using it. Um, and then it's non rival, which means two people can use it this time. So this is a Republican because nationally finds protects everyone, and everyone will say multiple people and experience this benefit. So that's why national defense is a public now. If we left national defense the payment for an afternoon defense to private producers, no individual, what happened? Incentive to bet to pay. And what would result is something called the free Ride. So let's read about the few rider problem. This is from top. It says one. Individuals make decisions about buying public a few rider problem in Iraq, which people have an incentive, but others pay for the public good and then 23 eyed on the purchases. When individuals make sixties by buying public good, this come yourself again, as they say. And if you got a problem, especially from the personal dilemma, when you're learning about your not boasting competition all once again, just true that what it is, it's in which people having a son takes like other things for the public. Good a nonsense. There's a provided public good that is available to all 23 ry on other purposes of others is possible. So, um, later on in the reading, it says the key inside and pay for public goods is to find a way of assuring everyone on it. You should answer that three lives, for example, of people who come together through the political process and agree to pay taxes and make decisions about the quantity of goods. You find a problem by refining the lock everyone. So it's because of the fuel line rider problem at the federal government cheese. So the garment is to eliminate this related problem. That's why you are taxpayer money where everyone has to pay taxes, including the president, so or herself. The government uses his taxpayer money to fund are not aren't forcing so that is the reason why. And also if everyone tried to feed I, then there would be no national defense at all. So that is really the main reason to eliminate entirely. It's for you have a problem. If you guys enjoying my video explanation recycle like that next year, I hope you all have in its day you're watching today.

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