Why will private enterprise, in general, not provide public goods?

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Because they are non-rivalrous and non-excludable, it is difficult to collect fees for them

No one can be kept out of a public good, and one person’s use leaves enough for others. So people who do not pay still enjoy it. Fees are hard to collect, and a private firm cannot earn from it.

Option (1) Because they are non-rivalrous and non-excludable, it is difficult to collect fees for them — Correct. Without fees, a private firm has no earnings from the good.

Option (2) Because the government does not allow private firms to produce public goods — Incorrect. Public goods may be produced by the government or the private sector.

Option (3) Because anyone who does not pay can easily be excluded from enjoying them — Incorrect. This is true of private goods. Public goods are non-excludable.

Option (4) Because they are rivalrous, so each consumer wants an exclusive share of them — Incorrect. Public goods are non-rivalrous.

NCERT (2026-27): “Summary 1. Public goods, as distinct from private goods, are collectively consumed. Two important features of public goods are – they are non-rivalrous in that one person can increase her satisfaction from the good without reducing that obtained by others and they are non-excludable, and there is no feasible way of excluding anyone from enjoying the benefits of the good. These make it difficult to collect fees for their use and private enterprise will in general not provide these goods. Hence, they must be provided by the government.”

“Allocation Function of Government Budget … Public goods may be produced by the government or the private sector. When goods are produced directly by the government it is called public production.”