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Government rather than private firms must provide economically desirable public goods because A
Government rather than private firms must provide economically desirable public goods because
A. Public goods have marginal costs that exceeds marginal benefits.
B. The law of increasing opportunity costs applies only on public good.
C. High marginal costs preclude their production in the private sector.
D. Public goods have characteristics that make it difficult or impossible for private firms to provide them profitably.
Expert Solution
The answer to this question is:
D. Public goods have characteristics that make it difficult or impossible for private firms to provide them profitably.
The public good is nonrivalrous and nonexcludable, therefore, there is an enticement not to pay. Since private firms are profit-oriented, they are less likely to provide a public good. Therefore, the need for government to impose taxation so as to provide a public good.
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