Public goods tend to be undersupplied through the market since it is difficult for potential suppliers to withhold such goods from nonpaying consumers; the government can use taxes to overcome this problem of nonpayment.

Question

Quizplus · Accepted Answer

This is a common argument for government intervention in the provision of public goods. Private suppliers have no incentive to produce public goods because they cannot charge nonpaying consumers for their use. As a result, the market may not produce an efficient quantity of the public good necessary to satisfy the demands of society. The government can overcome this problem by using taxes to finance the production of public goods or by providing the goods directly.

Public Goods Tend to Be Undersupplied Through the Market Since