question archive Which of the following is an accurate explanation with regard to why governments are often involved in the supply of public goods? a
Which of the following is an accurate explanation with regard to why governments are often involved in the supply of public goods? a
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Which of the following is an accurate explanation with regard to why governments are often involved in the supply of public goods?
a. Public goods are valued highly by some but not by the majority of people.
b. Markets will tend to supply less than the efficient quantity of public goods because it is difficult to prevent people from consuming these goods even if they do not pay.
c. Consumers do not value public goods and therefore they would not be produced if the government did not supply them.
d. In a democracy, the incentive to supply goods desired by well-organized interest groups is weak.
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b. Markets will tend to supply less than the efficient quantity of public goods because it is difficult to prevent people from consuming these goods even if they do not pay.
Public goods show two significant qualities -
1. It's not possible for anyone to be prohibited from their consumption.
2. Consumption by one person doesn't diminish the amount accessible for consumption by other people.
Since it's not possible for anyone to be prohibited from the consumption and utilization of public goods and services, it would be unimaginable for private producers to limit non-payers from consuming public goods. So, there will in general be a free-riding problem. This problem leads to market supply being less than the efficient quantity of public goods as the private producer doesn't get fully compensated for goods produced. This urges the administration to step in and supply public goods in a socially optimal and efficient quantity.
