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Economics (AS & A Level) · Oct / Nov 2021 · Paper 33 · Question 2

9708Classification of goods and services

Why are public goods an example of market failure?

  1. AProducers undervalue the benefits of a public good.
  2. BPublic goods have high fixed costs of production.
  3. CThe non-excludability of a public good leads to the free rider problem.
  4. DWhen a public good is consumed by one person, it is not available to others.

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Correct answer: C. The non-excludability of a public good leads to the free rider problem.

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