Math problem: provision of public goods i. Under-provision of public goods in the market ii. Efficient provision: Samuelson Rule
时间: 2024-05-26 11:15:36 浏览: 132
The provision of public goods is often subject to market failures, which can lead to under-provision of these goods. This is because public goods are non-rivalrous and non-excludable, meaning that once they are provided, everyone can benefit from them and no one can be excluded from using them.
Under-provision of public goods occurs because private firms or individuals have little incentive to invest in the provision of these goods, as they cannot capture all the benefits of their investment. This leads to a situation where the total benefits of the public goods are greater than the total costs, but the private incentives to provide them are insufficient.
To address this market failure, the Samuelson Rule suggests that public goods should be provided up to the point where their marginal social benefit (MSB) equals their marginal social cost (MSC). In other words, the provision of public goods should be increased until the point where the additional benefits to society are equal to the additional costs of providing them.
By using the Samuelson Rule, society can ensure that public goods are provided at the efficient level, where the total benefits to society are maximized. This can be achieved through various mechanisms, such as government provision, subsidies, or taxes on private goods that create positive externalities.
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