8. When some goods are public A. The market outcome is Pareto optimal B. The market...

8. When some goods are public

A. The market outcome is Pareto optimal B. The market outcome is not Pareto optimal because too much of the public good is supplied. C. The market is not Pareto optimal because too little of the public good is supplied due to the free-rider problem. D. The market outcome is not Pareto optimal because government spending is distortionary.

Expert Solution

Option c is correct. When some goods are public, the market is not pareto optimao, because too little of the public good is supplied due to the free rider problem.
Free rider problem preventa production and consumption of good and services. Free rider is a person who enjoy the benefits from something without paying for it. Free rider problem leads to less production and supply of public goods
All other options are wrong.
For public market outcome is not pareto optimal. Public good is not much supplierd due to free rider problem. Free rider is a type of market failure. So free rider problem will not results market efficient outcome

Rahul Sunny answered 2 years ago

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