The free rider problem refers to a situation in which

Select one:

a. people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.

b. the marginal cost of allowing additional consumers to consume a public good is zero.

c. high income individuals subsidize the production of goods, such as education, that make society better off.

d. markets fail to allocate resources efficiently when benefits outweigh costs.

Question

Business

Verena

30 August, 21:46

The free rider problem refers to a situation in which

Select one:

a. people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.

b. the marginal cost of allowing additional consumers to consume a public good is zero.

c. high income individuals subsidize the production of goods, such as education, that make society better off.

d. markets fail to allocate resources efficiently when benefits outweigh costs.

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Answers (1)

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Micaela Abbott · Answer 1

A. people consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.

Explanation: A free rider problem occurs when people benefit from a good or a service that they are not paying for. It is common with public goods that are provided by the government and people enjoy them without making any payment. Free riders or individuals enjoying the goo or services do not contribute their fair share and thus free rider problem is an economy failure. People may therefore tend to overuse the free good or service without paying for them thus causing an economic burden.