The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-For which of the following goods will the free rider problem arise?

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-For which of the following goods will the free rider problem arise?

Quizplus · Accepted Answer

The free rider problem arises with goods that are non-excludable and non-rivalrous, meaning individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others. National defense is a classic example of a public good that suffers from the free rider problem, as it is provided on a national scale and protects all citizens regardless of individual contribution.

The Table Below Shows the Payoff (Profit) Matrix of Firm