Chapter 14R, Problem 23MCQ

To determine

The correct option with which markets for public goods experience problems.

Answer to Problem 23MCQ

From the available options, the correct option is free riders.

Explanation of Solution

Markets for public goods experience problems when people try to use public goods at the cost of others. And, free-riders are the people who do the same as they want others to pay for public goods but they use those goods themselves. Whereas overconsumption or excessive use is not a big problem in the market of public goods, and market power for public goods is a benefit, not a problem. There would not be high marginal external costs as public goods deliver marginal external benefits too. Therefore, the correct option is b (free riders), and all options: a, c, d, and e are incorrect.

Economics Concept Introduction

Introduction: Excludable refers to the situation when according to people's willingness to pay, producers can prevent certain people from using or consuming goods and services. And, the rival in consumption means if one person consumes a good or service then it reduces the number of available goods and services for consumption by another.

Public goods covers are both non-excludable as well as non-rival.