Why does the market fail to produce public goods?
A)Because normally there is no demand for such goods.
B)Because it is impossible for the producer to exclude non-buyers from enjoying the benefit.
C)Because such products usually entail large external costs.
D)Because their production normally leads to increased income inequality.

Question

Quizplus · Accepted Answer

The market fails to produce public goods because they are non-excludable, which means that it is impossible for the producer to exclude non-buyers from enjoying the benefits. As a result, people may choose not to pay for the product and instead free ride on the contributions of others, leading to underproduction or non-production of the good.

Why Does the Market Fail to Produce Public Goods