In the context of public goods, the free-rider problem leads to:
A. No role for government
B. Efficient provision by private firms
C. Over-provision of public goods by the market
D. Under-provision of public goods by the market
Answer: Option D
Solution (By JKSSB Mock Tests)
Because individuals can enjoy the benefits of a pure public good without paying, they have an incentive to free-ride, resulting in under-provision if left to the private market.
Explanation:
Modern New Keynesian DSGE models used for policy analysis feature optimising households and firms, rational expectations, and some form of nominal rigidity (sticky prices or wages).
Explanation:
Digital public goods are open-source software, open data, open AI systems, open standards and open content that adhere to privacy and other best practices and help attain the Sustainable Development Goals.
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