Which of the following is true?
A) The nature of public goods is such that the government cannot accurately assess the benefits and costs of those affected.
B) National defense and flood control are illustrations of public goods.
C) Just as in the case of external benefits, public goods tend to be underprovided by the private sector.
D) All of the above are true.

Question

Quizplus · Accepted Answer

All three statements are true.

A) The nature of public goods is such that they cannot be efficiently provided by the private sector alone as there is no market mechanism to accurately assess the benefits and costs of those affected.

B) National defense and flood control are examples of public goods as they are non-rival in consumption and non-excludable in nature.

C) Public goods tend to be underprovided by the private sector, as they cannot capture all the benefits and recover the costs of production, and hence, require government intervention or provision.

Which of the Following Is True