Finance 8th Edition English AnswersInstructor’s Manual to accompanyPublic Finance Eighth Edition by Harvey S Rosen and Ted GayerSuggested Answers to End-of-Chapter Discussion QuestionsSome of the ques

ale, then someone with an organic view might support it.

b. The debate over the Affordable Care Act (Obamacare) reflects fundamental differences in views about the role of government in society. Libertarians argue that individuals should be free to make their own health care decisions without government interference, while social democrats believe that the government has a responsibility to provide health care to its citizens. Those with an organic view might evaluate the ACA based on whether it helps to achieve the state’s goals, such as improving public health and reducing health care costs.

3. Public finance is the branch of economics that studies the role of government in the economy. It includes topics such as taxation, government expenditures, public goods, and social welfare programs. Public finance is important because government policies have a significant impact on the economy and on individuals’ well-being. Understanding public finance is essential for making informed decisions about public policy.

Chapter 2 - The Public Sector in a Mixed Economy

1. a. A private good is one that is rival and excludable, meaning that consumption by one person diminishes the quantity available to others and that it is possible to prevent others from consuming it. Examples include food, clothing, and electronics. A public good is nonrival and nonexcludable, meaning that consumption by one person does not reduce the quantity available to others and that it is difficult or impossible to prevent others from consuming it. Examples include national defense, streetlights, and public parks.

b. A common resource is rival but nonexcludable, meaning that consumption by one person diminishes the quantity available to others but that it is difficult or impossible to prevent others from consuming it. Examples include fish in the ocean and timber in a forest. A quasi-public good is one that has some characteristics of a public good but is not completely nonrival or nonexcludable. Examples include cable TV and toll roads.

2. The free rider problem arises when individuals can enjoy the benefits of a public good without paying for it. Since a public good is nonexcludable, individuals cannot be prevented from consuming it even if they do not contribute to its provision. As a result, rational individuals may choose not to contribute to the provision of public goods, assuming that others will do so and they can still enjoy the benefits. This can lead to underprovision of public goods, since the total amount provided will be less than the socially optimal level.

3. There are several ways to overcome the free rider problem and ensure that public goods are provided at the socially optimal level. One approach is to use government taxation and expenditure to provide the public good directly. Another approach is to use government regulation or subsidies to encourage private provision of the public good. A third approach is to use voluntary contributions, such as through charities or crowdfunding, although this is often unreliable and may not be sufficient to provide the public good at the socially optimal level.

Chapter 3 - Public Goods

1. a. A pure public good is one that is completely nonrival and nonexcludable, meaning that consumption by one person does not reduce the quantity available to others and that it is impossible to prevent others from consuming it. Examples include national defense and clean air.

b. A pure private good is one that is completely rival and excludable, meaning that consumption by one person diminishes the quantity available to others and that it is possible to prevent others from consuming it. Examples include food and clothing.

c. A pure common resource is one that is completely rival but nonexcludable, meaning that consumption by one person diminishes the quantity available to others but that it is difficult or impossible to prevent others from consuming it. Examples include fish in the ocean and timber in a forest.

d. A pure club good is one that is completely nonrival but excludable, meaning that consumption by one person does not reduce the quantity available to others but that it is possible to prevent others from consuming it. Examples include cable TV and private parks.

2. The existence of public goods can create market failures because private markets may not provide them at the socially optimal level. Since public goods are nonexcludable, individuals can consume them without paying for them, leading to underprovision of the good. This can result in a welfare loss, since the total benefits to society from the public good are greater than the private benefits that individuals receive. Government intervention may be necessary to provide public goods at the socially optimal level.

3. The free rider problem arises when individuals can enjoy the benefits of a public good without paying for it. Since a public good is nonexcludable, individuals cannot be prevented from consuming it even if they do not contribute to its provision. As a result, rational individuals may choose not to contribute to the provision of public goods, assuming that others will do so and they can still enjoy the benefits. This can lead to underprovision of public goods, since the total amount provided will be less than the socially optimal level