The $560 Billion Investment in America’s Transportation Infrastructure

EconEye Admin

4 years ago

A bipartisan infrastructure bill guarantees $65 billion to expand broadband Internet service, and $65 billion to upgrade the nation’s power grid. The Department of Transportation will receive more than $560 billion to improve tunnels, bridges, roads, mass transit, ports, and airports. —cbsnews.com

Answer the following questions to check your understanding of the story.

Why does the federal government provide broadband Internet services and upgrades to the power grid, tunnels, bridges, roads, mass transit, ports, and airports?

The federal government provides these goods and services and upgrades because ______________.

a) they provide external benefits and politicians who support government provision gain votes and campaign contributions

b) they are public goods, and the free-rider problem would occur with private provision

c) private production would result in inefficient overprovision

d) the government provides them at the lowest possible cost

Wrong! - What would be the outcome if these goods, services, and upgrades were produced by private firms? Why does the political equilibrium promote production by the federal government?

Well Done! - People want broadband Internet services and upgrades to the power grid, tunnels, bridges, roads, mass transit, ports, and airports because they have external benefits that spill over into society. So, voters support provision of these goods, services, and upgrades with their votes and campaign contributions. Politicians supply these goods, services, and upgrades because they serve their self-interest. Provision of these goods, services, and upgrades by government creates the political equilibrium.

How does the political marketplace provide these goods and why is this bill bipartisan?

In the political marketplace, ______________. This bill is bipartisan because ______________.

a) voters demand and politicians and bureaucrats supply; voters are tired of partisan politicians

b) voters supply and politicians and bureaucrats demand; in a political equilibrium both parties must gain the vote of the median voter

c) voters demand and politicians and bureaucrats supply; in a political equilibrium both parties must gain the vote of the median voter

d) voters supply and politicians and bureaucrats demand; voters are tired of partisan politicians

Wrong! - Who demand and who supplies in the political marketplace? How do voters, politicians, and bureaucrats serve their own self-interest? What causes a politician to support any bill?

Correct! - Voters demand the goods, services, and upgrades that serve their self-interest. Politicians and bureaucrats supply the goods, services, and upgrades that serve their self-interest. The political equilibrium creates support for a bipartisan bill because both parties must gain the vote of the median voter.

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