Question

Public goods represent a market failure because

a. positive externalities are created through their production.
b. by their very nature they are nonexcludable and nonrival which makes it difficult for the private sector to supply them profitably.
c. they are provided by firms with market power.
d. their is incomplete information regarding their quality.

Answer 1

Public goods are a market failure due to their nonexcludable and non rival nature leading to the free rider problem, making private provision unprofitable.

Step-by-step explanation:

Public goods represent a market failure because B. by their very nature they are nonexcludable and nonrival which makes it difficult for the private sector to supply them profitably. Public goods, such as roads, parks, and libraries, are nonexcludable, meaning it is costly or impossible to prevent someone from using them, and they are non-rival, meaning that one person's use does not decrease the utility for others. This leads to the free rider problem, where individuals might benefit from the good without contributing to its cost, making it unattractive for private companies to provide these goods. The government often steps in to supply these goods to overcome this challenge.

Answer 2

Public goods are available everywhere and are both non-excludable and non-rivalrous
They represent a market failure because by their very nature they are nonexcludable and nonrival which makes it difficult for the private sector to supply them profitably. Answer: B
Public goods are nonrival in consumption and their benefits are nonexcludable