Which of the following statements is true of the free rider problem?
A)People consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.
B)The marginal cost of allowing additional consumers to consume a public good is zero.
C)High income individuals subsidise the production of goods, such as education, that make society better off.
D)Markets fail to allocate resources efficiently when benefits outweigh costs.

Question

Quizplus · Accepted Answer

The free rider problem refers to the situation in which individuals benefit from a public good without contributing to its production. Public goods, such as national defense or street lighting, can be consumed without payment or restriction by anyone who desires to do so. This creates a collective action problem, as individuals have little incentive to contribute to the provision of the good, since they can enjoy its benefits without incurring the cost of production. This leads to a market failure, as the under-provision of public goods can result in suboptimal social outcomes.

Which of the Following Statements Is True of the Free