Multiple Choice
Which of the following best describes a grant given by the federal government to a state for a specific purpose in the context of public goods?
61
views
8. The Types of Goods
Public Goods: Demand Curve and Optimal Quantity
Multiple Choice
Which of the following is not an obstacle to achieving the optimal quantity of a public good?
A
Non-excludability of public goods
B
Difficulty in measuring individual willingness to pay
C
Perfect information about consumer preferences
D
Free rider problem
Verified step by step guidance1
Step 1: Understand the concept of a public good. Public goods are characterized by two main features: non-excludability (people cannot be prevented from using the good) and non-rivalry (one person's use does not reduce availability to others).
Step 2: Identify common obstacles to achieving the optimal quantity of a public good. These typically include non-excludability, which leads to the free rider problem, and difficulty in measuring individual willingness to pay, which complicates efficient provision.
Step 3: Recognize the free rider problem as a direct consequence of non-excludability, where individuals have an incentive to consume the good without paying for it, leading to under-provision.
Step 4: Analyze the option 'Perfect information about consumer preferences.' Perfect information means that the preferences and willingness to pay of consumers are fully known, which actually helps in achieving the optimal provision rather than being an obstacle.
Step 5: Conclude that among the options given, 'Perfect information about consumer preferences' is not an obstacle to achieving the optimal quantity of a public good, while the others are.
Related Videos
Related Practice
