Public goods are underprovided by the private market because they are non-excludable and non-rivalrous, leading to free-rider problems where individuals are not willing to pay for the good even though they benefit from it, resulting in a willingness to pay that is less than the marginal benefit.

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Public Goods Are

Question 94

Multiple Choice

Public goods are

A) under provided by the private market because the marginal cost of production is too high.
B) under provided by the private market because the marginal benefits of consumption are too low.
C) under provided by the private market because people's willingness to pay for the good is less than the marginal benefit of the good.
D) over provided by the private market because the marginal benefits of consumption are too high.

Correct Answer: