Why Is It Difficult for a Private Market to Provide

question 80

Multiple Choice

Why is it difficult for a private market to provide the economically efficient quantity of a public good?

• A)By law, governments cannot use cost-benefit analysis to determine this quantity.
• B)Public goods produce positive and negative externalities.
• C)Individual preferences are not revealed in the market for the good.
• D)It is too expensive to produce the necessary amount of the good.

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Definitions:

Financial Advantage

The benefit gained from making economic decisions that result in increased wealth or financial health.

Average Cost

A method of cost valuation that calculates the cost of goods sold and inventory based on the average cost of all similar items in inventory.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production, such as rent, salaries, and equipment depreciation, associated specifically with manufacturing.

Financial Advantage

The benefit gained in financial terms, which can result in better profitability or cost savings.