Why must the government step in to provide public goods?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The payment link between the producer and the consumer is broken
People can use a public good without paying (free-riders). A seller cannot collect fees, so the payment link breaks and the government must step in.
Option (1) The benefits of public goods are restricted to the people who pay for them — Incorrect. Benefits are available to all, payers or not.
Option (2) The payment link between the producer and the consumer is broken — Correct. Without payment, a private seller earns nothing.
Option (3) One person’s consumption of a public good reduces the amount available to others — Incorrect. This describes a private good. Public goods are non-rivalrous.
Option (4) Private firms are not allowed by law to produce any public good — Incorrect. Public goods may be produced by the private sector too.
NCERT (2026-27): “Allocation Function of Government Budget … Even if some users do not pay, it is difficult and sometimes impossible to collect fees for the public good. These non-paying users are known as ‘free-riders’. Consumers will not voluntarily pay for what they can get for free and for which there is no exclusive title to the property being enjoyed. The link between the producer and consumer which occurs through the payment process is broken and the government must step in to provide for such goods. … Public goods may be produced by the government or the private sector. …” |