The free-rider problem arises if goods are
A)nonrivalrous in consumption.
B)rivalrous in consumption.
C)nonexcludable.
D)excludable.

Question

Quizplus · Accepted Answer

The free-rider problem occurs when individuals can benefit from a public good or service without having to pay for it themselves, and this happens when goods are nonexcludable, meaning people cannot be effectively excluded from using the good or service. Nonrivalrousness in consumption is a separate concept referring to whether one person's use of a good diminishes the amount available for others, and is not directly related to the free-rider problem. Rivalrous goods (answer B) are ones where one person's consumption does affect another's ability to consume, but this doesn't necessarily make them susceptible to free-riding. Excludability (answer D) is the opposite of nonexcludability and does help reduce free-riding, but it alone doesn't ensure non-free-riding as some excludable goods (like club goods) can still be underprovided due to collective action problems.

The Free-Rider Problem Arises If Goods Are