ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Doing what it is supposed to do
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Not doing what it is supposed to do
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Realizing there is no easy way to charge individuals
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Realizing it can make more profits by putting pressure on gvernments to change
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Detailed explanation-1: -In the social sciences, the free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods and common pool resources do not pay for them or under-pay. Examples of such goods are public roads or public libraries or services or other goods of a communal nature.
Detailed explanation-2: -While society has a clear need for lighting for motorists and pedestrians, the free rider problem prevents the private market from providing such goods. Private firms don’t provide streetlights because there’s no way to exclude people who don’t pay for them.
Detailed explanation-3: -Quasi-public goods – definition Examples include roads, tunnels and bridges. Markets for these goods are considered to be incomplete markets and their lack of provision by free markets would be considered to be inefficient and a market failure.
Detailed explanation-4: -Examples of public goods include law enforcement, national defense, and the rule of law. Public goods also refer to more basic goods, such as access to clean air and drinking water.