📚 Learning Guide
Public Goods and Free Rider Problem
hard

Which of the following scenarios best illustrates the concept of the free rider problem as it relates to public goods and market failure?

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Question & Answer
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Choose the Best Answer

A

A person enjoying a public park without contributing to its maintenance.

B

A farmer purchasing seeds to grow crops for sale.

C

A company investing in new technology for competitive advantage.

D

A student paying tuition for their education.

Understanding the Answer

Let's break down why this is correct

Answer

The free rider problem happens when people benefit from a good or service without paying for it, leading to a situation where not enough of the good is produced or provided. A good example is a public park that everyone can enjoy without paying an entrance fee. If many people visit the park but few contribute to its maintenance, the park may become dirty or unsafe over time because there aren’t enough funds to keep it nice. This shows how the free rider problem can lead to market failure, where the park’s quality decreases because the costs are not shared fairly among all users. In this way, the benefits of the park are enjoyed by everyone, but the responsibility to support it falls on only a few.

Detailed Explanation

A person using a public park without helping to keep it nice shows the free rider problem. Other options are incorrect because Buying seeds for crops is not about free riding; Investing in technology is a business choice, not free riding.

Key Concepts

Free rider problem
Market failure
Public versus private goods.
Topic

Public Goods and Free Rider Problem

Difficulty

hard level question

Cognitive Level

understand

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