There are 1,000 families in a neighborhood that is affected by noise pollution from a local factory. The noise level is within legal limits, but could be reduced further if the company spent $5,000 on technological improvements. The company agrees to make these improvements if the affected families contribute the $5,000. A committee starts to collect donations to pay for the improvements. Which of the following is most likely to occur?
A) Because there are relatively few families involved and the individual contribution is so small, all families will voluntarily contribute.
B) Because each individual contribution is so small and individuals will benefit from the reduction in noise whether they contribute or not, most people will not contribute and the firm will not make the improvements.
C) Even if the families raise the $5,000, the firm will not reduce its noise pollution because it is within legal limits.
D) The courts will force the firm to spend the $5,000 regardless of whether or not the families contribute the money.

Question

Quizplus · Accepted Answer

This scenario is an example of the free-rider problem, where individuals are unlikely to contribute to a public good (in this case, noise reduction) because they can benefit from it without paying. Since the noise reduction will benefit all families regardless of their contribution, many will opt not to contribute, expecting others to cover the cost.

There Are 1,000 Families in a Neighborhood That Is Affected