Often public goods cannot be provided through market mechanism This is because It is difficult to se...........

Economic Affairs Others

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Often public goods cannot be provided through market mechanism. This is because

It is difficult to separate individual users of the service.
The good does not decrease in value even after being consumed by additional users.

Which of the above is/are correct?

1 only

2 only

Both 1 and 2

None

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Explanation:

Statement 1: A good can be priced only when you know who is using and how much is being used, for e.g. a soap is used by one person and it is quite easy to make them pay for it. But, there are some goods where doing this is not possible. For e.g. if providing clean air is a public good, then it is not possible to separate users who consumer a fixed quantity of clean air, and it is also not possible to exclude someone from using them. In such a

case, a central authority or body must provide the good at either a constant price to all, or make it free of cost for users. However, it should be noted that, in either of these cases, the body cannot use the market principles of pricing.