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The market system fails to produce an efficient level of public goods because:

The market system fails to produce an efficient level of public goods because:

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Answer #1

When a good is both excludable and rival in consumption, then it is private good.

Non-excludable means when people cannot be excluded from enjoying the goods and services.

Rival means when an additional individual uses the good, then for remaining people the availability decreases.

Public goods can be defined as those goods which are non-rival in consumption and non-excludable in nature.

The public good is non-rival and non-excludable in nature. The cost of providing public good is very high and there is free rider problem. This is the reason why a market system fails to produce an efficient level of public good.

Hence it can be said that the market system fails to produce an efficient level of public goods because the public good is non-rival and non-excludable in nature. The cost of providing public good is very high and there is free rider problem.

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