Which of the following is true?
A)The private market provides too much of goods that generate external benefits.
B)In the case of external benefits, if we could add the benefits that are derived by non-paying consumers, the supply curve would shift to the right, increasing output.
C)In the case of external benefits, a tax equal to external benefits would result in an efficient level of output.
D)In the case of public goods, when people act as free-riders, some goods having benefits greater than costs will not be produced.

Question

Which of the following is true?
A)​The private market provides too much of goods that generate external benefits.
B)​In the case of external benefits, if we could add the benefits that are derived by non-paying consumers, the supply curve would shift to the right, increasing output.
C)​In the case of external benefits, a tax equal to external benefits would result in an efficient level of output.
D)​In the case of public goods, when people act as free-riders, some goods having benefits greater than costs will not be produced.

Quizplus · Accepted Answer

In the case of public goods, the free-rider problem occurs because individuals can benefit from the good without contributing to its cost, leading to underproduction of goods that have benefits greater than their costs, as private firms cannot capture enough of the benefits to justify the costs.

Which of the Following Is True