There are 1,000 families in a neighborhood that are affected by noise pollution from a local factory. The noise could be reduced if the company spent $5,000 on technological improvements. The company agrees to make these improvements if the affected families contribute the $5,000. However, because 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. This outcome is an example of the

Question

Quizplus · Accepted Answer

The free-rider problem occurs when individuals benefit from resources, goods, or services without paying for them, which leads to under-provision of those goods or services, as seen in the scenario where individuals benefit from noise reduction without contributing financially.

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