Because of the Free-Rider Problem

question 122

Multiple Choice

Because of the free-rider problem,

• A) the market demand for a public good is overstated.
• B) the market demand for a public good is nonexistent or understated.
• C) government has increasingly yielded to the private sector in producing public goods.
• D) public goods often create serious negative externalities.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to a state of balance in the market.

Equilibrium Quantity

The amount of goods or services supplied that is exactly equal to the amount of goods or services demanded at a particular price level.

Demand

The total amount of a product or service that consumers are willing and able to purchase at various price levels at a given time.

Price Range

The spread between the highest and lowest prices of goods or services in the market.