An important difference between the demand for a private good and the demand for a public good is that
A)individuals reveal their preferences for a public good, but they do not have to reveal their preferences for a private good.
B)the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned.
C)individuals reveal their preferences for a private good, but they do not have to reveal their preferences for a public good.
D)the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.

Question

Quizplus · Accepted Answer

The key difference between private and public goods in terms of demand is that individuals must reveal their preferences for private goods through their purchasing decisions, whereas for public goods, individual preferences can be hidden, leading to the free-rider problem. This is because public goods are non-excludable and non-rivalrous, meaning people can benefit from them without directly paying for or revealing their true valuation of them.

An Important Difference Between the Demand for a Private Good