Question

The efficient quantity of a public good can't be produced by private firms because.

a. the price would be too high if private firms produced the goods.
b. private firms aren't large enough.
c. only the government has the necessary resources.
d. it is impossible to determine the efficient amount.
e. consumers have an incentive to free ride and not pay for their share of the good.

Answer 1

Private firms find it difficult to produce public goods because of the free rider problem, which occurs when individuals can benefit from the good without paying for it. This results in less than the socially optimal amount of the good being produced. Only the government, with its ability to tax and compel citizen compliance, can effectively provide public goods.

Step-by-step explanation:

The efficient quantity of a public good can't be produced by private firms because of the free rider problem. Public goods are goods or services that are nonexcludable and non-rival, meaning it is costly or impossible to exclude others from using the good and one person's use of the good does not prevent others from using it. Private firms find it difficult to produce public goods because individuals can benefit from them without paying for them, resulting in less than the socially optimal amount of the good being produced. This is why only the government, with the ability to tax and compel citizen compliance, can effectively provide public goods.