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Public goods suffer from the Free-Rider Problem because:

APublic goods are priced too high by private firms
BNon-excludability allows individuals to consume the good without paying for it
CGovernment taxes prevent private production
DProduction costs drop to zero

Explanation

Since non-payers cannot be excluded from consuming a public good, individuals have no incentive to voluntarily pay for it.

Submitted by: mcqstutor Team More Economics MCQs →

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