Question

From the standpoint of economic efficiency, markets tend to provide a. less of a public good than would be efficient. b. more of a public good than would be efficient. c. exactly the amount of a public good that is efficient. d. none of the above

Answer 1

Answer:

A) less of a public good than would be efficient.

Explanation:

The main characteristic of free markets is that the private participants (suppliers and consumers) decide how to allocate resources. They allocate resources in a way that their utility is maximized: suppliers maximize their profit while consumers maximize satisfaction. The problem with private goods  is that they do not maximize profits for the suppliers, therefore, very few or no suppliers are willing to supply them resulting in a shortage.