Nonexcludable goods tend to be undersupplied because:
A) the free rider problem persists.
B) people do not pay the true value of the good.
C) people rarely willingly pay for something they could get for free, regardless of how much they value it.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

Nonexcludable goods, such as public parks and national defense, tend to be undersupplied because of the free rider problem - individuals can enjoy the benefits of the good without actually contributing to its production. Additionally, people may not be willing to pay the true value of the good or may choose not to pay for it at all if they can access it for free, which further contributes to underinvestment in these goods. Therefore, all of the statements mentioned in options A, B, and C are true, making option D the correct answer.

Nonexcludable Goods Tend to Be Undersupplied Because