Because individuals are unlikely to reveal their demand for public goods, private firms will produce a _______ quantity of public goods than is _______ .
A) smaller; efficient
B) smaller; inefficient
C) greater; efficient
D) greater; inefficient

Question

Quizplus · Accepted Answer

Private firms will produce a smaller quantity of public goods than is efficient because they cannot capture the full value of those goods through market transactions. As a result, private firms may underproduce public goods, such as infrastructure, that provide benefits to the broader community.

Because Individuals Are Unlikely to Reveal Their Demand for Public