Why does the government provide public goods
A)Private markets are incapable of producing public goods.
B)Free riders make it difficult for private markets to supply the socially optimal quantity.
C)Markets are always better off with some government oversight.
D)External benefits will occur to private producers.

Question

Quizplus · Accepted Answer

Public goods are characterized by non-excludability and non-rivalry, meaning that it is difficult or impossible to exclude individuals from benefiting from the good, and one person's consumption of the good does not diminish others' ability to consume it as well. Because of these characteristics, private markets would have difficulty supplying the socially optimal quantity of the good, as free riders have an incentive to consume the good without paying for it. Therefore, government provision of public goods can help ensure that the socially optimal quantity is provided.

Why Does the Government Provide Public Goods