The optimal mix of output may not be produced by an economy because of the existence of

Question

Quizplus · Accepted Answer

Public goods can lead to market failure because they are non-excludable and non-rivalrous, meaning they can be consumed by anyone without reducing their availability to others. This characteristic can lead to underproduction of public goods by the market, as firms may not find it profitable to produce goods they cannot exclusively sell, leading to a suboptimal mix of output.

The Optimal Mix of Output May Not Be Produced by an Economy