Indicate whether each of the following statements is true, false, or uncertain,
ID: 2383011 • Letter: I
Question
Indicate whether each of the following statements is true, false, or uncertain, and justify your answer.
a. Efficient provision of a public good occurs at the level at which each member of society places the same value on the last unit.
b. If a good is nonrival and excludable, it will never be produced by the private sector.
c. A road is nonrival because one person’s use of it does not reduce another person’s use of it.
d. Larger communities tend to consume greater quantities of a nonrival good than smaller communities.
Explanation / Answer
a.This statement is false.
Efficient provision of a public good occurs at the level where total willingness to pay for an additional unit equals the marginal cost of producing the additional unit.
b.This statement is false
Due to the free rider problem, it is unlikely that a private business firm could profitably sell a product that is non-excludable. However, recent research reveals that the free rider problem is an empirical question and that we should not take the answer for granted. Public goods may be privately supported through volunteerism, such as when people who attend a fireworks display voluntarily contribute enough to pay for the show.
c. Uncertain. This statement is true if the road is not congested, but when there is heavy traffic, adding another vehicle can interfere with the driversal ready using the road.
d. This statement is false.
There will be more users in larger communities, but all users have access to the quantity that has been provided since the good is nonrival, so there is no reasons larger communities would necessarily have to provide a larger quantity of the nonrival good.