Which includes fewer public goods than is optimal

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by how much is the market

a. Overproducing private goods?

b. Underproducing public goods? Underproduction of Public Goods Suppose point A represents the optimal mix of output-that is, the mix of private and public goods that maximizes society's welfare. Because consumers won't demand purely public goods in the marketplace, the price mechanism won't allocate so many resources to their production. Instead the market will tend to produce a mix of output like point B, which includes fewer public goods (0 R) than is optimal (0 S).

Reference no: EM13214340

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