Private markets have difficulty providing public goods due to the free-rider problem.?

Question

a. True
b. False

Answer 1

Of course it's A-true.

A public good like street lights. it's impossible to charge individual seperately for the use or for enjoyment from them.
So, there are insufficient incentives for private firms to make them, unless the govt is willing to invest in public funding, and that has always been their responsibility.

That's why the govt collects tax, as a source to finance public goods that otherwise private firms are unwilling to produce.
The people feel safe, or crimes are lowered as an overall benefit to society, creating free-rider situation bcoz people are not making contributions significantly for the security benefits.

Answer 2

True. The free-rider problem means that one cannot exclude someone from using a product or an idea that you produce. If you cannot exclude them, then you cannot force them to pay, and your incentives to produce in the private market are reduced.