How can public expenditure on infrastructure influence resource allocation in the long run?

• A. It has no effect on long-run resource allocation.
• B. It reduces the incentives to invest.
• C. It increases private sector monopolies.
• D. It improves productivity, reduces costs, and shifts resources toward more valuable uses; supports long-run growth.

Answer: (D)

Public expenditure on infrastructure changes the cost and productivity landscape for the economy. By improving roads, ports, energy, and digital networks, it lowers production and transaction costs and raises the efficiency of firms. When costs fall and productivity rises, resources move toward the most valuable uses, since firms can earn higher returns in those areas. This shifts the allocation of capital and labor toward more productive activities and supports higher potential output, helping long-run growth. The other statements don’t fit because infrastructure spending generally stimulates private investment by improving returns and competition, rather than reducing incentives or increasing private monopolies, and it does have a meaningful long-run effect on how resources are allocated.