Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Market efficiency
B
Public goods provision
C
Price elasticity
D
Consumer surplus
Understanding the Answer
Let's break down why this is correct
Answer
Consumers not revealing their true willingness to pay for a product creates a situation called information asymmetry, where one party has more information than the other. Similarly, free riders who benefit from public goods without contributing create a problem known as the "free rider problem. " This occurs because public goods, like clean air or national defense, are available to everyone, whether they pay for them or not. For example, if a person enjoys a public park without paying taxes, they are a free rider, as they benefit from the park's maintenance funded by others. Both scenarios illustrate how unequal information or contributions can lead to inefficiencies in the market or society.
Detailed Explanation
Free riders enjoy public goods without paying for them. Other options are incorrect because Market efficiency means resources are used well; Price elasticity is about how demand changes with price.
Key Concepts
Information Asymmetry
Free Rider Problem
Market Inefficiencies
Topic
Consumer Demand and Information Asymmetry
Difficulty
easy level question
Cognitive Level
understand
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