Chapter 76, Problem 2MCQ

To determine

The correct option for the free-rider problem

Answer to Problem 2MCQ

From the available options, the correct option is common resources.

Explanation of Solution

As common resources are the natural scarce resources or goods which are also not always non-rival in consumption, therefore, when a free-rider problem occurs then it is a situation of common resources. It happens because there is an issue of a market failure due to inefficient distribution of goods and services which can be the cause of the scarcity of goods in the market. But private goods involve a large number of goods and services that cannot be scarce easily.

Therefore, the correct option is b (common resources).

Economics Concept Introduction

Introduction: Excludable refers to the situation when according to people's willingness to pay, producers can prevent certain people from using or consuming goods and services. And, a rival in consumption means if one person consumes a good or service, then it reduces the number of available goods and services for consumption by another.

A public good covers both non-excludable as well as non-rival. And, a private good is excludable and rival in consumption which may prevent people from consuming when one person consumes the same good.