Ok this is the last one
Why do public goods demonstrate the limitations of a free market economy?
A. They allow consumers to make all of the economic decisions.
B. They allow government to make some economic decisions.
C. They allow government to control most economic decisions.
D. They prevent cosumers from making ecenomic decisions.
B. They allow government to make some economic decisions.
The correct answer is B. They allow the government to make some economic decisions.
Public goods are goods or services that are non-excludable and non-rivalrous, which means they are open for everyone to access and enjoy, and one person's consumption of the good does not diminish the availability for others. Examples of public goods include clean air, national defense, and street lighting.
The limitations of a free market economy arise when it comes to the provision of public goods. In a free market, the primary mechanism for determining the allocation of resources is based on supply and demand, where market participants make their own economic decisions. However, public goods are difficult to provide in a purely market-driven system because of their non-excludable nature.
Since public goods are available to everyone, it is challenging for private entities to profit from their production and distribution. In a free market, private businesses have little incentive to produce public goods because they cannot exclude individuals from benefiting without paying and recouping the costs. As a result, public goods are underproduced or not produced at all in a free market system.
To overcome this limitation, the government plays a role in providing public goods. By taxing individuals and businesses, the government can raise funds to produce and maintain public goods that benefit society as a whole. The government's involvement allows for the provision of public goods that may not be adequately produced in a purely market-driven economy.
Therefore, public goods demonstrate the limitations of a free market economy because they require government intervention and decision-making to ensure their provision.