An example of a market failure associated with the provision of public good in the private market is:
A)free-riders pay too much for the good, so it is undersupplied
B)free-riders don't pay for the good, so it is undersupplied
C)free-riders pay too much for the good, so it is oversupplied
D)free-riders don't pay for the good, so it is oversupplied

Question

Quizplus · Accepted Answer

In the provision of public goods, free-riders don't pay for the good but still benefit from it. This creates a situation where private firms are not motivated to invest in the provision of the public good due to the inability to charge consumers for individual use. As a result, the good is undersupplied in the private market.

An Example of a Market Failure Associated with the Provision