Markets may have difficulty providing the proper quantity of a public good because
A) individuals will tend to become free riders, and private firms will have difficulty generating enough revenue to produce an efficient quantity of the good.
B) the good generally has a very large value to consumers relative to its cost of production.
C) the good is one that tends to benefit a large number of people.
D) the large profit involved in the production of a public good is generally too much for private firms to effectively pay out to shareholders.

Question

Quizplus · Accepted Answer

Individuals tend to become free riders because they can benefit from the public good without paying for it, leading private firms to struggle with generating sufficient revenue to produce the efficient quantity.

Markets May Have Difficulty Providing the Proper Quantity of a Public