An efficient amount of a public good is unlikely to be produced in a free market because
A)there is no way to prevent a person who is not willing to pay for the good from receiving benefits from the good.
B)of the high cost of producing the public good.
C)social benefits exceed social costs.
D)of the existence of moral hazard.
E)of the existence of adverse selection.

Question

Quizplus · Accepted Answer

In a free market, individuals are only willing to pay for goods that provide them with a benefit. However, in the case of public goods, there is no way to prevent individuals who are not willing to pay for the good from receiving benefits. This creates a free rider problem and reduces the incentives for private firms to produce the good. As a result, an efficient amount of a public good is unlikely to be produced in a free market.

An Efficient Amount of a Public Good Is Unlikely to Be