Final answer:
Markets produce too little of an excludable public good because of the difficulty in charging users for nonexcludable goods like national defense, leading to free-riding and underproduction. Government intervention is usually required to address this and other market failures such as monopoly and pollution.
Step-by-step explanation:
Markets tend to produce too little of an excludable public good because private companies face challenges in producing public goods that are nonexcludable. An excludable good is one where people can be prevented from using it unless they pay for it, while a nonexcludable good, like national defense.
When a good is nonexcludable, firms cannot easily charge people for their usage, leading to a scenario where consumers may choose not to pay for the good in anticipation that others will cover the cost. This is known as the free-rider problem, and it results in the underproduction of such goods by the market.