Consider the following statements : (i) In case of public good, the economy will not reach a point of…
Both statements are correct. Public goods provide benefits that are not confined to the individual purchaser, creating positive external effects. The resulting free-rider…
Choose your answer
Consider the following statements :
(i) In case of public good, the economy will not reach a point of Pareto optimality in a perfectly competitive market.
(ii) Public goods create externality.
Answer and explanation
Correct answer A
Both statements are correct. Public goods provide benefits that are not confined to the individual purchaser, creating positive external effects. The resulting free-rider problem prevents a perfectly competitive market from providing the Pareto-optimal quantity.
Practice for these exams
-
Madhya Pradesh SET (MP SET)