Consider a remote village with a limited,freely available water supply and no government intervention in the allocation of water.Economic theory predicts that the water will be
A)allocated efficiently because users will tend to use the water until marginal cost and marginal benefit are both equal to zero.
B)overexploited because users will tend to use the water until the marginal cost of providing the water is zero.
C)allocated efficiently because users will tend to use the water until the supply and demand are in equilibrium.
D)overexploited because users will tend to use the water until their marginal benefit is zero.
E)allocated efficiently because users will tend to use the water as though it were a public good.

Question

Quizplus · Accepted Answer

In the absence of regulation, users will overexploit the water resource, using it until their marginal benefit is zero, leading to a "tragedy of the commons" scenario.

Consider a Remote Village with a Limited,freely Available Water Supply