The Free-Rider Problem Occurs When

question 49

Multiple Choice

The free-rider problem occurs when:

• A)buyers pay less than their reservation price.
• B)sellers receive more than their reservation price.
• C)people who do not pay for a good or service cannot be excluded from enjoying it.
• D)people who pay for a good or service cannot be excluded from enjoying it.

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Definitions:

Nonrival

Refers to a good where one person's use does not reduce the amount available for others.

Nonexcludable

A characteristic of goods where it is difficult or impossible to prevent people from using the good once it has been provided.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are available to every individual without diminishing availability to others, such as national defense, public parks, and clean air.

Marginal Social Benefit

The additional benefit that society receives from the consumption of an additional unit of a good or service.