A fundamental reason that governments provide public goods is that
A) those goods are subject to the free-rider problem.
B) negative externalities are part of the production process of those goods.
C) public goods are merit goods.
D) those goods are perfectly divisible.

Question

Quizplus · Accepted Answer

Governments provide public goods because they are subject to the free-rider problem, which means that individuals can benefit from the use of the public good without contributing to its provision. This leads to an under-provision of the good in the market, making it necessary for the government to step in and provide it.

A Fundamental Reason That Governments Provide Public Goods Is That