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Public schools, parks, libraries, and roads are paid for largely through tax revenue because: a
Public schools, parks, libraries, and roads are paid for largely through tax revenue because:
a. these goods create a free-rider problem.
b. if they were funded privately, too many of these goods would be produced.
c. society finds them so valuable that citizens are happy to pay for their full cost.
d. All of the above are correct.
Expert Solution
Public schools, parks, libraries, and roads are paid for largely through tax revenue because:
a. these goods create a free-rider problem.
Free rider problem is a market failure which occurs in case of the public good. The public good is a collective or common good which used by everyone, and to exclude anyone from using it, is impossible. So when people know that other person will pay for that good and they can use it in free, then the person tries to escape from paying the cost. When a person tries to avail the common good free of cost, then this problem is known as the free-rider problem.
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