Question

private provision of public goods question 2select one: a. fails because the private firm will always go broke. b. succeeds if consumers expect to obtain a benefit from the consumption of the public good. c. succeeds because public provision is often more costly. d. fails because of the free-rider problem. e. fails because private firms generally charge higher prices than public firms, and therefore lose customers.

Answer 1

Private provision of public goods typically fails due to the free rider problem, where individuals benefit from the goods without paying for them, making it unsustainable for private companies to provide these goods.

Step-by-step explanation:

The question you have asked relates to the free rider problem commonly encountered in the provision of public goods. This is a situation where providing a good that is nonexcludable and non-rivalrous, like national defense or street maintenance, is challenging for private firms. Individuals can benefit from these goods without directly paying for them, which means private firms find it difficult to charge for these services, ultimately leading to an underprovision of the good. When considering the options provided for your question, option 'd' is accurate - the private provision of public goods often fails because of the free rider problem, where people benefit from the good without contributing to its cost, making it unsustainable for a private firm to provide the good at a socially optimal level without external funding or mechanisms to overcome this issue.