The free rider problem suggests that a producer will tend to:
A)produce more than the optimal quantity of a public good.
B)produce less than the optimal quantity of a public good.
C)produce the optimal quantity of a public good if it is funded out of tax revenue.
D)do none of the above.

Question

The free rider problem suggests that a producer will tend to:
A)​produce more than the optimal quantity of a public good.
B)​produce less than the optimal quantity of a public good.
C)​produce the optimal quantity of a public good if it is funded out of tax revenue.
D)​do none of the above.

Quizplus · Accepted Answer

The free rider problem occurs when individuals can benefit from a public good without having to pay for it. As a result, they have little incentive to contribute to its production. This means that the producer may not receive enough funding to produce the optimal quantity of the public good, resulting in underproduction. Therefore, choice B is the correct answer.

The Free Rider Problem Suggests That a Producer Will Tend