The non-rival characteristic of a pure public good, such as a regional coastal flood defense barrier, causes market failure because:
the marginal cost of supplying the good to an additional user is zero, meaning that charging any price above zero to recover fixed costs leads to allocative inefficiency.
it is impossible to prevent individuals who have not paid from benefiting from the barrier, which leads to the free-rider problem and complete non-provision.
the utility gained by one resident decreases as more residents move into the protected area, leading to rapid depletion of the resource.
private firms will overprovide the defense barrier because they cannot estimate the marginal private cost of production.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.