Individuals want nonexcludable public good X, but the market does not provide it because of the free rider problem. Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

Question

Individuals want nonexcludable public good X, but the market does not provide it because of the free rider problem.  Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

Quizplus · Accepted Answer

Taxing individuals allows the government to raise revenue and overcome the free rider problem by making everyone contribute to the provision of the public good. The government can then use this revenue to produce the public good itself or pay someone else to do it. Forcing individuals to work longer hours or surveying them may not necessarily provide a solution to the free rider problem, while subsidizing production may still not incentivize individuals to contribute if they can still benefit from the public good without paying for it.

Individuals Want Nonexcludable Public Good X, but the Market Does