📚 Learning Guide
Public Goods and Free Rider Problem
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Public goods, by definition, can be efficiently provided by the private sector without any government intervention due to their non-excludable and non-rivalrous nature.

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Learning Path
Learning Path

Question & Answer
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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

Public goods are special types of goods that everyone can use, and one person's use doesn't take away from someone else's use. This means they are non-excludable and non-rivalrous; for example, clean air is something we all share, and using it doesn't stop others from using it too. However, because these goods are available to everyone, some people might decide not to pay for them, hoping others will cover the cost instead. This is called the free rider problem, where individuals benefit from a resource without contributing to its maintenance. So, while it might seem that private companies could provide public goods efficiently, the free rider problem often leads to underfunding and under-provision of these essential services.

Detailed Explanation

Public goods need government help because they are hard to sell. Other options are incorrect because Some might think private companies can handle public goods alone.

Key Concepts

Public Goods
Free Rider Problem
Market Failure
Topic

Public Goods and Free Rider Problem

Difficulty

medium level question

Cognitive Level

understand

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