Suppose a city builds a new park that is advertised as being "open to the public," and the grass in the park is ruined by overuse within two months.This would be an example of _____.
A)adverse selection
B)moral hazard
C)the common-pool problem
D)a positive externality
E)arbitrage

Question

Quizplus · Accepted Answer

This scenario demonstrates the common-pool problem, which occurs when a resource that is open to everyone is overused and depleted. In this case, the park was advertised as being open to the public, so everyone had access to it, but the grass was ruined due to overuse. This is a classic example of the tragedy of the commons, where individuals acting in their own self-interest can lead to negative outcomes for the group as a whole.

Suppose a City Builds a New Park That Is Advertised