question archive The government provides public goods because: a) private markets are incapable of producing public goods
The government provides public goods because: a) private markets are incapable of producing public goods
Subject:MarketingPrice:2.88 Bought18
The government provides public goods because:
a) private markets are incapable of producing public goods.
b) free-riders make it difficult for private markets to supply the socially optimal quantity.
c) markets are always better off with some government oversight.
d) external benefits will occur to private producers.
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The correct option is:
b) free-riders make it difficult for private markets to supply the socially optimal quantity.
Once the public goods are provided, they are open for consumption for all. No one can be denied its consumption and hence these goods are even consumed by people who are not paying for it. Thus, in the case of the private market, it is very difficult to ascertain their correct market price as people consume them even without paying for it.
