Private firms can hardly produce a public good profitably because of:

Question

Quizplus · Accepted Answer

The free-rider problem makes it difficult for private firms to produce public goods profitably because individuals can consume the good without paying for it, leading to under-provision of the public good. This creates a market failure that requires government intervention to ensure the provision of public goods. Liability rules, lawsuits, shortages and surpluses, moral hazard and adverse selection are not necessarily unique to the provision of public goods and do not explain why private firms cannot produce public goods profitably.

Private Firms Can Hardly Produce a Public Good Profitably Because