Why are private companies unlikely to provide public goods?

• A. Because private companies lack the resources to produce goods for large groups of people.
• B. Because public goods are always less valuable than private goods.
• C. Because public goods are non-excludable and non-rivalrous, making it difficult for companies to charge consumers and earn profits.
• D. Because public goods always require government regulation to be produced.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of public goods. Public goods are characterized by being non-excludable (you cannot prevent people from using them) and non-rivalrous (one person's use does not reduce availability to others).
2. Step 2: Recognize why these characteristics create a problem for private companies. Since public goods are non-excludable, companies cannot easily charge consumers because people can benefit without paying (free-rider problem).
3. Step 3: Analyze the profit incentive for private companies. Because they cannot exclude non-payers, private companies find it difficult to earn profits from providing public goods.
4. Step 4: Contrast this with private goods, which are excludable and rivalrous, allowing companies to charge consumers and earn profits.
5. Step 5: Conclude that due to the non-excludable and non-rivalrous nature of public goods, private companies are unlikely to provide them, often leaving their provision to the government or collective organizations.