Price Mechanism Excludes Public Goods Supply

Steps:

• Recall price mechanism allocates resources via supply-demand signals in competitive markets.
• Identify roles: prices guide production, consumption, and factor use for private goods.
• Note limitation: public goods (non-excludable, non-rivalrous) evade price signals, relying on public provision.
• Evaluate options: select what contradicts price's allocative function.

Why A is correct:

• Public goods supply is determined by government intervention, not market prices, as defined in welfare economics where free-rider problems prevent efficient private allocation.

Why the others are wrong:

• B: Prices function in goods markets (consumer choice) and factor markets (resource distribution).
• C: Price rationing prioritizes willingness/ability to pay, ignoring equitable needs distribution.
• D: Rising prices indicate demand, signaling producers to increase profitable output.

Final answer: A