Question

THIS IS A 2 PART QUESTION FROM THE ECONOMIC WAY OF THINKING:

The important difference between police protection and food that explains why one is commonly provided by government while the other is not is that food:

A can easily be withheld from those who won't pay for it.

B it is not a traditional concern of governemtn

C it is too vital to be trusted to the government

D producers form a powerful political lobby

E provided through the government would be too inefficient

The Bureau of Economic Analysis excludes from its calculation of gross domestic product most of the goods produced that are not sold in markets because:

A Their production has no real cost

B Their value is implicitly included in marketed goods

C there is no satisfactory way to measure their value

D They do not contribute to the national welfare

E this would be inappropriate for an exchange economy

Answer 1

1) The important difference between police protection and food that explains why one is commonly provided by government while the other is not is that food provided through the government would be too inefficient.

If the government provides food to the society, it may not maximize each individual's utility due to presence of heteroskedastic population and on the other hand police protection provided by the government may provide same utility to each individual (give a sense of security to rich and poor equally).

2) The Bureau of Economic Analysis excludes from its calculation of gross domestic product most of the goods produced that are not sold in markets because

2)The Bureau of Economic Analysis excludes from its calculation of gross domestic product most of the goods produced that are not sold in markets because Their value is implicitly included in marketed goods.

GDP is calculated using value addition at each step of production. hence, even if the good is not sold, its value is added in GDP at the production state, that is, from its conversion from raw material to final good. This is to avoid double-counting.