Chapter 76, Problem 5MCQ

To determine

The option which most likely worsens the overuse of common resources when the community has a public forest where citizens can harvest as many trees as they want.

Answer to Problem 5MCQ

From the available options, the correct option is a subsidy for tree harvesting.

Explanation of Solution

When the community has a public forest where citizens can cut as many trees as they want then, if the government provide a subsidy on the cutting or harvesting of trees then it makes the overuse of common resource worsen because people will start to cut trees at a large rate. Whereas, if the tax is imposed on each harvested tree, banning the cutting of trees, making it compulsory to have a license for tree harvesting, or assigning property to the forest, then it will protect the common resources at a certain rate because it will reduce harvesting of the tree.

Therefore, the correct option is e (a subsidy for tree harvesting).

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.

Common resources are the natural scarce resources or goods which are also not always non-rival in consumption