In the Absence of Government Action, Why Would the Private

question 93

Multiple Choice

In the absence of government action, why would the private market probably NOT provide as much police protection as is socially desirable?

• A) because the use of police services by one person will significantly reduce the police protection available to others
• B) because the private benefits are greater than the private costs of providing police protection
• C) because individuals are too poorly informed about the value of police protection
• D) because it is difficult to prevent free riders from benefiting from some police protection services

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Definitions:

Foreseeable

Refers to an event or condition that a reasonable person would anticipate and therefore expect to consider while making decisions.

Insurance

A financial product that provides protection against financial loss resulting from specific risks.

Nature of Risk

The inherent features and characteristics of risk, including its potential to lead to negative outcomes or loss.

Conflagration Insurance

Insurance coverage designed to protect against losses from large and intensive fires that consume a wide area and a large amount of property.