The government often provides funding for the arts when markets do not do so sufficiently. This funding is to overcome which market failure?

Question

Quizplus · Accepted Answer

Positive externalities occur when the benefits of a good or service extend beyond the individual consumer to society as a whole. In the case of arts funding, the consumption of art can lead to positive externalities such as increased cultural awareness, community engagement, and even economic development. However, these positive externalities are not accounted for in the market as they do not generate direct revenue for producers, leading to a market failure. Therefore, the government provides funding to address this market failure by promoting the production and consumption of art.

The Government Often Provides Funding for the Arts When Markets