Question

Which of the following would most likely occur in a capitalist economy?

a. Failure to produce non-rival and non-excludable goods.

b. Failure to produce rival and excludable goods.

c. The rich get richer and the poor get poorer.

d. A business cycle causing depressions every 10-12 years.

The answer is a could someone please explain why?

Answer 1

Ans:

Option A

Failure to produce non-rival and non-excludable goods.

In case of capitalist economy, goods and services are produced based on supply and demand in the market. Public goods are both non-rival and non-excludable goods. It means public goods can be consumed by people who did not pay for the good and consumption by one consumer does not prevent consumption by other consumers. Hence capitalist economy fails to produce non-rival and non-excludable goods.