A private,competitive market
A) provides the efficient quantity of a public good.
B) allocates too few resources for a public good.
C) allocates too many resources for a public good.
D) can be relied upon to allocate resources efficiently both for private and public goods.
E) will allocate too many resources for a public good only if free riding occurs.

Question

Quizplus · Accepted Answer

In a private competitive market, individuals are motivated by self-interest and will only purchase goods that provide them with a direct benefit. Public goods, however, provide benefits to everyone regardless of whether they pay for them or not. As a result, private markets tend to underallocate resources to public goods, leading to a suboptimal quantity being produced.

A Private,competitive Market