A private consortium is considering launching a regional satellite constellation to provide emergency weather broadcasting signals. Because the signal is broadcast openly, it cannot be restricted to paying subscribers once transmitted. Which of the following best explains why the free market fails to provide this service, requiring government provision?
The non-rival nature of the transmission means the marginal cost of an additional user is zero, which causes private firms to overproduce the service and collapse the market price.
The non-excludable nature of the signal prevents the consortium from charging consumers directly, creating a free-rider problem that results in a missing market.
Information asymmetry between the signal providers and users regarding signal accuracy leads to a moral hazard problem, preventing market equilibrium.
The existence of positive externalities associated with emergency broadcasts causes private firms to overproduce the service beyond the socially optimal level.
23 exam-style questions on OCR A Level Economics Public goods. Each one has a worked solution and a mark scheme showing where the marks go.