Consider a remote village with a limited,freely available water supply and no government intervention in the allocation of water.In economics,the resulting outcome of a situation such as this is often referred to as
A)the Coase theorem.
B)the tragedy of the commons.
C)moral hazard.
D)adverse selection.
E)asymmetric information.

Question

Quizplus · Accepted Answer

The tragedy of the commons is a situation where a shared resource such as water is overused and depleted because of a lack of government intervention or regulations. Each individual in the village has an incentive to use as much water as possible, leading to a collective depletion of the water supply. This outcome is a classic example of the tragedy of the commons. The Coase theorem refers to a situation where private bargaining can result in efficient outcomes, but is less applicable in this scenario with a limited freely available resource. Moral hazard, adverse selection, and asymmetric information all refer to different types of informational problems in the market, and are not applicable to this situation.

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