ECONOMICS
MARKET FAILURES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
goods that would not be provided by the free market
|
|
|
goods that would not be provided by the free market, that are rivalrous and excludable
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -A public good is often (though not always) under-provided in a free market because its characteristics of non-rivalry and non-excludability mean there is an incentive not to pay. In a free market, firms may not provide the good as they have difficulty charging people for their use.
Detailed explanation-2: -Can markets produce public goods? Government spending and taxes are one way to provide public goods, but they’re not the only way. In some cases, markets can produce public goods.
Detailed explanation-3: -Pure public goods are not normally provided by the private sector because they would be unable to supply them for a profit. It is up to the government to decide what output of public goods is appropriate for society. To do this, it must estimate the social benefits from making public goods available.
Detailed explanation-4: -The government plays a significant role in providing goods such as national defence, infrastructure, education, security, and fire and environmental protection almost everywhere. These goods are often referred to as “public goods”.
Detailed explanation-5: -Because the private market is profit-driven, it produces only those goods for which it can hope to earn a profit. That is, it will not produce public goods.