The market system fails to provide the efficient output of public goods because:
A)people place no value on public goods.
B)private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them.
C)public enterprises can produce those goods at lower cost than private firms.
D)public goods create widespread spillover costs.

Question

The market system fails to provide the efficient output of public goods because:
A)​people place no value on public goods.
B)​private firms cannot restrict the benefits from those goods to consumers who are willing to pay for them.
C)​public enterprises can produce those goods at lower cost than private firms.
D)​public goods create widespread spillover costs.

Quizplus · Accepted Answer

Public goods are non-excludable, meaning that it is not possible to restrict their benefits to those who are willing to pay for them. As a result, private firms cannot generate sufficient revenue from producing public goods, leading to underproduction. Therefore, the market system fails to provide an efficient output of public goods.

The Market System Fails to Provide the Efficient Output of Public