Provide an intuitive explanation of the free-rider problem.
What will be an ideal response?
Since a person's consumption of a public good is independent of how much he/she contributes to the public good, he/she will have the incentive to shirk on his/her contribution to the public good. Hence, people have the incentive to "free ride" off other contributors to the public good.
You might also like to view...
In perfect competition, firms enter the market whenever the market price exceeds the minimum average variable cost
Indicate whether the statement is true or false
The gains from trade rely on overall productivity (absolute advantage)
Indicate whether the statement is true or false
In the probit regression, the coefficient ?1 indicates
A) the change in the probability of Y = 1 given a unit change in X B) the change in the probability of Y = 1 given a percent change in X C) the change in the z- value associated with a unit change in X D) none of the above
Suppose a perfectly competitive firm wants to increase its level of output profitably. To do this, the firm needs to
a. find a way to lower its marginal cost. b. should raise its price to sell any additional output. c. should lower its price to sell any additional output. d. will not be able to sell the additional output at any price because of the many other competitive firms that exist.