Assertion (A) :Existence of public goods hinders achievement of pareto-optimality. Reasoning (R) : The…

Under ordinary unregulated competitive provision, non-excludability and free riding obstruct the efficient public-good supply satisfying ΣMB = MC. Individuals may have different marginal valuations, so the reason is true, but heterogeneous benefits alone do not cause market failure: ordinary private goods also have heterogeneous valuations. Thus both true but the stated reason does not explain the assertion is the intended reading. Public goods can be supplied efficiently with suitable institutions.