1. Why aren't more people opting out? If they are, then where are the high quality fire services to take the place of the fire department?
The vast majority of firefighters are unpaid volunteers. Furthermore, there is no particular reason to compete with the government when it has a blank check and the power to find a reason to arrest you for attempting to compete. Look no farther than the postal service: A man by the name of Lysander Spooner once set up a competing postal company which was soon much cheaper and of higher quality than that of the federal government; the postal service then had the government shut down his operation. Thus, it was demonstrated that attempting to create alternatives to government monopolies will, if successful, result in being shut down and your profits stolen.
I looked this up, and it appears to have happened in freaking 1840.
In 2011, the USPS is way faster than UPS and cheaper than FedEx. I never really got how people could send a letter from NY to CA in 2 days for 50 cents and then claim the post office as model of horrible government inefficiency.
Now the one good argument that I've heard from AnCaps about this is that eliminating limited liability will take care of a lot of this. But then they don't explain how that doesn't keep the market from losing a lot of its dynamism. If I have to be worried that the shares I own in chemical company Y are going to make me criminally liable for an accident, I'm going to be a hell of a lot less likely to invest my money in companies that I don't know a ton about and aren't engaging in any risky practices.
But, it would certainly make it more interesting for CEOs if they could spend the rest of their life in a cage, be shunned from a community, stripped of all their wwealth, or shot in the head (or whatever forms of restitution are used in the jurisdiction they are operating in) for, say, spilling a bunch of toxic sludge in a town and causing a bunch of kids to die.
[of course, this does not deal with the short term gains/long term problems whereby actions can be taken and hands can be washed long before negative effects come to light]
What it also doesn't consider is the "who's going to stop me?" mentality that, with the power and wealth of modern corporations, makes in hard for even strong governments to hold anyone accountable. Now imagine what would happen if arresting that criminal CEO involved a completely toothless government (or a private company with no real incentive to do so) mounting a full-scale military assault on the offending company's army of thousands of mercenaries. How long before every corporate headquarters looks more like a military base than an office building? Imagine a world where surviving occasional sieges was part of your IT job. And then when you get off work you have to drive twice as far to get home because the only direct highway is owned by a guy who charges $20 to drive it, and you definitely can't afford that on the $4 an hour you make in a country without minimum wage laws. Maybe you'll get lucky and your company will buy the road and let you drive it if you agree to work for $3 an hour. Or maybe other companies will see the profit potential and set up 16 or 17 parallel roads for differing costs. Then everyone can drive on the cheapest road - problem solved, and it only took littering your town with 15 wasted, empty highways to get there. That's the efficiency of the free market!