ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Sellers of the good or service are unable to prevent consumers from enjoying its benefits without payment.
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Producers demand a higher price than some members of the public are prepared to pay.
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Only governments have the technical knowledge required to produce public goods and services.
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They can only be produced by a monopoly firm to prevent competition from rival suppliers.
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Detailed explanation-1: -public goods are of equal benefit to all consumers. there is no opportunity cost in the provision of public goods. people could consume the good without paying for it.
Detailed explanation-2: -There are several reasons why government generally provides a public good. First is the fact that it is costly to exclude individuals from consuming a good that exhibits the characteristics of a public good. For example, suppose a private firm provides police protection to a certain area of a city.
Detailed explanation-3: -The government provides society with certain public goods because it would be inefficient or impractical for a free market economy to provide these goods on its own.
Detailed explanation-4: -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.