When producers (say, of roads) are not able to make all consumers pay for enjoying their product (i.e., the roads), they tend to see a:
A) Marginal cost of production that is too low, and there is a supply-side market failure
B) Marginal benefit of production that is too high, and there is a demand-side market failure
C) Marginal cost of production that is too high, and there is a supply-side market failure
D) Marginal benefit of production that is too low, and there is a demand-side market failure

Question

Quizplus · Accepted Answer

When producers are not able to make all consumers pay for enjoying their product, it leads to a situation known as "free-rider problem," where some consumers benefit from the product without paying for it. This results in the marginal benefit of production being too low, as the producers' revenue doesn't capture the full value of the product. Therefore, there is a demand-side market failure.

When Producers (Say, of Roads) Are Not Able to Make