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Will competitive markets generally produce the efficient amount of a public good?

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Will competitive markets generally produce the efficient amount of a public good?

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  1. Yes, competitive markets in reality are the only type of competition naturally producing socially efficient level of output (though formally monopolistic potentially can have lower costs due to scale/specialization effects but they engage in profit-maximization).


  2. No.  

    Public goods are non-rival (if you get happiness from it, so can someone else) and non-excludable (nobody can stop you from getting happiness from it).  These can come in the form of public fireworks displays and parks.  

    The problem with these is because no one can stop you from having happpiness from it.  Therefore, if there is one, you will use it, but if one is going to be produced, you are unlikely to want to pay for it (because once there is one, you can use it without having to pay).

    Therefore, public goods are underproduced in the competitive market.

    The government generally subsidizes public goods.  

  3. Jurij-EU  read the question.  

    Obviously no....read your textbook.

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