Use the following to answer question(s): Correcting for Market Failure: A Public Good

-(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.By imposing taxes to finance the public good, the government could move the production from R to the efficient level of production of:
A) Q.
B) U.
C) W.
D) X.

Question

Use the following to answer question(s): Correcting for Market Failure: A Public Good
 
-(Exhibit: Correcting for Market Failure: A Public Good) A private market produces R units of output of a public good.By imposing taxes to finance the public good, the government could move the production from R to the efficient level of production of:
A) Q. 
B) U. 
C) W. 
D) X.

Quizplus · Accepted Answer

Public goods are typically underproduced in a private market due to the free-rider problem. By imposing taxes, the government can increase production to the efficient level, which is often represented by a point like W in economic models.

Use the Following to Answer Question(s): Correcting for Market Failure