The Efficient Quantity of a Public Good Can't Be Produced

question 39

Multiple Choice

The efficient quantity of a public good can't be produced by private firms because

• A) only the government has the necessary resources.
• B) consumers have an incentive to free ride and not pay for their share of the good.
• C) the price would be too high if private firms produced the goods.
• D) private firms aren't large enough.
• E) it is impossible to determine the efficient amount.

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Definitions:

Natural Monopoly

A market in which a single firm can provide a good or service at a lower cost than any potential competitor, due to economies of scale.

Lower Cost

A situation where the expenses involved in producing a good or service are reduced, leading to potential savings.

Social Regulation

Rules imposed by government aimed at improving societal welfare, focusing on areas such as health, safety, and the environment, rather than on economic matters.

Natural Monopoly

A market structure where a single firm can produce at a lower cost than can two or more firms, justifying limited competition.