Why is it difficult for a private market to provide the economically efficient quantity of a public good?
A)Because by law, governments cannot use cost-benefit analysis to determine this quantity
B)Because individual preferences are not revealed on the market for the good
C)Because public goods produce positive and negative externalities
D)Because it is too expensive to produce the necessary amount of the good

Question

Quizplus · Accepted Answer

In a private market, individuals will only purchase goods that have a direct benefit to themselves. Since public goods have benefits that are shared by society as a whole, individual preferences are not revealed on the market for public goods. As a result, it is difficult for the private market to provide the economically efficient quantity of a public good.

Why Is It Difficult for a Private Market to Provide