Why don't competitive markets do a good job providing public goods?
a. Because public goods generate negative externalities, and pollution taxes reduce the incentive for firms to supply public goods.
b. Because it is difficult to exclude people from gaining benefits from public goods without paying for them, and so market demand does not reflect the benefits to society from the public good.
c. Because firms cannot produce enough to satisfy market demand.
d. Because people do not receive benefits from public goods.
b
You might also like to view...
The tools of monetary policy are
A) government spending, tax rates, and the required reserve ratio. B) open market operations, differential between the discount rate and the federal funds rate, and the required reserve ratio. C) open market operations, differential between the discount rate and the federal funds rate, and tax rates. D) open market operations, government spending, and the required reserve ratio.
The demand curve for the product of a perfectly competitive firm is
A) downward sloping. B) upward sloping. C) perfectly inelastic. D) perfectly elastic.