What part of the economy is primarily responsible for financing public goods?

• A. Private sector
• B. Public sector
• C. Non-profit sector
• D. Corporate sector

Answer: (B)

The public sector is primarily responsible for financing public goods because it encompasses government entities and institutions that collect taxes and allocate resources to provide services and infrastructure that benefit all members of society. Public goods are characterized by being non-excludable and non-rivalrous, meaning that once they are provided, individuals cannot be excluded from using them, and one individual's use does not diminish another's ability to use them. Examples of public goods include national defense, public parks, and street lighting.

The public sector's role is crucial because the funding for these goods often requires significant investment that may not be feasible through private means. The private sector is motivated by profit, which can lead to underinvestment in public goods since they do not produce direct financial returns. Similarly, while non-profit organizations contribute to public welfare, they typically focus on specific missions rather than broad public goods funding. The corporate sector, while it can support initiatives through corporate social responsibility, is also generally profit-driven and does not assume the responsibility for the widespread provision of public goods. Thus, the public sector's unique capacity and obligation to finance and manage public goods make it the correct answer.