Final answer:
Public goods generate market failure due to their non excludability and non-rivalry characteristics, creating the free rider problem. Allocative efficiency is impossible to achieve in the market for public goods.
Step-by-step explanation:
A public good generates market failure because it is difficult for markets to provide these goods due to their nonexcludability and non-rivalry characteristics. Nonexcludability means that it is costly or impossible to exclude people from using the good, while non-rivalry means that one person's use of the good does not diminish its value for others. These characteristics create the free rider problem, where individuals can benefit from the public good without contributing to its production or maintenance. For example, consider a road. It is difficult to exclude people from using the road even if they do not contribute to its construction or maintenance.
Additionally, one more car using the road does not diminish its value for other drivers. This makes it challenging for markets to allocate resources efficiently for the production of public goods. In contrast, private goods are rival and excludable, allowing markets to efficiently allocate resources based on supply and demand forces. Therefore, option (a) is correct, as allocative efficiency is impossible to achieve with public goods due to their non rivalness and non excludability.