alleryStart learning →The difficulty private companies face in supplying public goods is called the:
AFree rider problem
BDiminishing returns
CSunk cost problem
DPrice ceiling issue
Answer & Solution
Correct answer: A. Free rider problem
1. If nobody can be excluded, nobody has to pay.
2. Private companies find it difficult to produce public goods.
3. The reason is set out as the free rider problem of public goods.
4. Everyone would rather let someone else pay and then enjoy the good anyway.
_Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 13 'Positive Externalities and Public Goods', sections 13.1-13.4_
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