The free rider problem refers to a situation in which
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 occurs when individuals consume a public good without paying for it, leading to underproduction or inefficient allocation of the good. This is because it is difficult to exclude non-payers from benefiting from the good once it is produced, and therefore individuals have an incentive to free ride on the payments of others.

The Free Rider Problem Refers to a Situation in Which