When public goods are provided by private firms, with no government involvement, we expect that:
A) the equilibrium quantity will be less than would be efficient.
B) the equilibrium quantity will be greater than would be efficient.
C) the equilibrium quantity will be the efficient quantity.
D) their profits will be excessive.

Question

Quizplus · Accepted Answer

This is because private firms will only produce public goods if they can make a profit, which may not necessarily be at the efficient quantity. Without government involvement, there is no incentive for firms to produce at the socially optimal level. Therefore, the equilibrium quantity is likely to be less than efficient.

When Public Goods Are Provided by Private Firms, with No