Why Are Private Firms Unable to Produce Public Goods

question 43

Multiple Choice

Why are private firms unable to produce public goods?

• A) Because the government outlaws private firms from producing them.
• B) The marginal cost of production is too high for private production to be possible.
• C) They can produce these goods, but they would not earn any revenue because of the free-rider problem.
• D) The tragedy of the commons means that private firms produce an inefficient amount of public goods.
• E) None of the above answers is correct.

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Definitions:

Consolidation

The process of combining multiple financial statements of a company into a single statement, often after acquisitions or mergers.

Acquiring Firm

An acquiring firm is a company that purchases or takes control of another company, typically through a merger or acquisition.

Corporate Takeover

The acquisition of one company (the target) by another (the acquirer), which can be friendly or hostile, often aiming to gain control of the target company’s operations and resources.

Public Offer

The sale of equity shares or other financial instruments to the public in order to raise capital from public investors.