Which of the following is an example of a market failure caused by the existence of a public good?
A) A levee is not built because no one wants to pay for it, even though everyone agrees that it is important.
B) We send a chimpanzee to space. You think it would be better if we send a lemur.
C) We spend $300 billion for national defense. You think it is too much.
D) McDonald's is your favorite restaurant. Other people think the food they serve is unappealing.

Question

Quizplus · Accepted Answer

In the case of a public good, there is a market failure when individuals are unwilling to pay for it even though it is necessary and beneficial for everyone. In this scenario, the levee is essential to protect the community from floods, but no one is willing to bear the cost of building it, resulting in a market failure.

Options B, C, and D do not relate to a market failure caused by public goods. Option B is a decision-making or preference issue and does not affect public goods, while option C is a matter of disagreement in spending decisions. Option D is a matter of individual taste or preference and does not relate to the concept of public goods.

Which of the Following Is an Example of a Market