Why might public provision of a public good be preferred over private provision?

• A. Private provision avoids under-provision due to free-rider and non-excludability.
• B. Public provision avoids under-provision due to free-rider and non-excludability.
• C. Public provision always increases costs with no benefits.
• D. Private provision under standard conditions leads to efficient provision.

Answer: (A)

Public goods are non-excludable and non-rival, which creates a strong free-rider problem in private markets. Since people can enjoy the good without paying, private firms have little incentive to supply it at the socially optimal level, leading to under-provision. Public provision, typically funded through taxes, guarantees that the good is provided and access is available to all, aligning the quantity supplied with what is socially desirable. The idea that private provision avoids under-provision isn’t consistent with how free-rider and non-excludability undermine private supply. The other statements overstate or misstate the situation: public provision isn’t inherently more costly with no benefits, and private provision doesn’t generally achieve efficient provision for true public goods.