Question

1.) Market failure associated with the free-rider problem is a result of

A a problem associated with pollution.

B benefits that accrue to those who don't pay.

C losses that accrue to providers of the product.

D market power.

2.) If everyone benefits from helping the poor,

A government intervention cannot improve social well-being.

B eliminating taxes aimed at redistributing income will make rich people better off.

C taxing the wealthy to raise living standards of the poor can potentially make everyone better off.

D private markets can adequately provide charity programs to help the poor, despite free-rider problems.

3.) Which of the following is a disadvantage of government provision of a public good such as national defense?

(i) The government does not know the exact willingness of consumers to pay for the public good.

(ii) The free-rider problem is more likely to occur when the government provides a public good than when the private sector provides a public good.

(iii) Taxpayers do not agree on the optimal quantity of the public good that the government should provide.

A (i) only

B (i) and (ii) only

C (i) and (iii) only

D (i), (ii), and (iii)

4.) Which of the following is not a way for the government to solve the problem of excessive use of common resources?

A regulation

B taxes

C turning the common resource into a public good

D turning the common resource into a private good

5.) The Tragedy of the Commons occurs because

A government property is most heavily used by the wealthy.

B everyone deserves an equal share of government property.

C social and private incentives differ.

D established property rights create competition.

Answer 1

1. Ans: Benefits that accrue to those who don't pay.

Explanation:

Free-rider problem occurs when some people benefit from the public goods or services do not pay for them. This results in an under provision of those goods or services. So, market failure occurs.

2. Ans: Taxing the wealthy to raise living standards of the poor can potentially make everyone better off.

3. Ans: (i) and (iii) only

4. Ans: turning the common resource into a public good.

5. Ans: social and private incentives differ.

Explanation:

The tragedy of the commons is a problem in which every individual tries to get the highest benefit from a given resource. As the demand for the resource exceeds the supply, every individual who consumes an additional unit directly affect others who can no longer enjoy the benefits.