Which of the following best defines the free rider problem?
Choose 1 answer:
(A) When the political or social environment is changed to extract more profit without contributing any additional benefit

B When production of a good creates costs that are not considered by producers
(c) When goods are nonexcludable, people have no incentive to pay for their production
(D) When consumption of a good creates benefits that are not considered by consumers
(E) When goods are non-rival, they tend to be overconsumed

Question

Which of the following best defines the free rider problem?
Choose 1 answer:
(A) When the political or social environment is changed to extract more profit without contributing any additional benefit

B When production of a good creates costs that are not considered by producers
(c) When goods are nonexcludable, people have no incentive to pay for their production
(D) When consumption of a good creates benefits that are not considered by consumers
(E) When goods are non-rival, they tend to be overconsumed

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Free Rider Problem: The free rider problem occurs when individuals can benefit from a good or service without paying for it, and the good is nonexcludable and non-rivalrous. ‖ ‖ b ⋮ Analysis of Answer Choices: - Answer A discusses manipulation for profit, which is not the free rider problem. - Answer B is about external costs, which is related to negative externalities, not the free rider problem. - Answer C correctly identifies the issue of nonexcludability leading to no incentive to pay. - Answer D is about unconsidered benefits, which is more related to positive externalities. - Answer E discusses non-rival goods and overconsumption, which is not the core issue of the free rider problem. ‖ ∻Answer∻ ⚹ C: When goods are nonexcludable, people have no incentive to pay for their production. ⚹ ∻Key Concept∻ ⚹ Free Rider Problem ⚹ ∻Explanation∻ ⚹ The free rider problem arises when a good is nonexcludable and non-rivalrous, leading to individuals having no incentive to pay for its production, as they can benefit from it without contributing to its cost.◊How does the concept of free rider problem relate to market failure in macroeconomics?⍭ Generate me a similar question◊⚹

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