Free ridership is associated with what kind of externality, and why?
A) positive, because costs are identified but not internalized
B) negative, because costs are identified but not internalized
C) positive, because many who benefit are not always identified or accounted for
D) negative, because many who benefit are not always identified or accounted for
E) positive, because social value equals private value

Question

Quizplus · Accepted Answer

Free ridership is associated with a positive externality because it occurs when the benefits of a good or service extend beyond those who directly pay for or consume it, meaning many who benefit (the "free riders") are not always identified or accounted for. This leads to underproduction of the good or service since not all benefits are captured by the producer.

Free Ridership Is Associated with What Kind of Externality, and Why