Final answer:
Public goods provide widespread benefits that cannot be restricted to only those who pay for them, which causes the free rider problem and influences public policy decisions on distribution and maintenance costs. The non-excludable and non-rival nature of these goods means they are typically funded by taxpayers and attempt to serve the public interest as a whole.
Step-by-step explanation:
The cost and benefit of public goods like roads, national defense, and public safety services relate directly to the challenges associated with their non-excludable and non-rival nature. For instance, public goods are financed through taxation because the benefit they provide to society is widespread and non-excludable; this ensures that even those who do not directly pay for the goods can still benefit from them. The cost, in turn, is shared among taxpayers, and the benefit is a safer, more functional, and interconnected society. However, this non-excludability leads to the free rider problem, where individuals or entities benefit from the public good without contributing financially to it.
Considering public policy decisions, who pays for creating and maintaining these goods and who benefits from them is a central concern. Benefits of public goods are distributed among all citizens, while costs are collected through taxation. This dynamic can lead to situations where the level of public goods provision is lower than socially optimal due to individuals' incentive to minimize personal contributions, hoping others will cover the cost.