The supply of public goods must be left to government and nonprofit institutions. Why?
Because nonpaying users usually cannot be excluded from enjoying a public good, suppliers of such goods will find it difficult or impossible to collect fees for the benefits they provide. This is the so-called free-rider problem. Services such as national defense and public health, which are not depletable and where excludability is impossible, cannot be provided by private enterprise because people will not pay for what they can get free. Because private firms are not in the business of giving services away, the supply of public goods must be left to government and nonprofit institutions.
You might also like to view...
During the Great Depression we observed:
a. higher prices. b. higher real wages. c. lower output. d. higher money wages. e. both b and d.
Restricting demand will lower inflation but
A. aggravate the unemployment problem. B. reduce the unemployment rate. C. have no impact on the unemployment rate. D. None of the above is correct.
Implicit costs are:
A. the opportunity costs of using resources owned by the entrepreneur in his/her own business. B. payments the business owner must make on borrowed funds. C. costs which vary as the level of output varies. D. those payments the business owner makes in cash.
What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone apps?
A) few firms in the market B) identical products C) ease of entry D) blocked entry