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

Economics

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a. True b. False Indicate whether the statement is true or false

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Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the short run would be:

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