Question

Understanding free-riders and solve the problem.

Fredo loves watching Downtown Abbey on his local public TV station, but he never sends any money to support the station during its fundraising drives.

a) What name do economists have for people like Fredo and why?

b) How can the government solve the problem caused by people like Fredo?

c) Can you think of ways the private market can solve this problem ? how does the existence of cable TV alter the situation?

Answer 1

a) Do economists call people like Fredo as 'Free rider' s people like him uses a products or service without paying for it. So, they 'free ride'

b) The government can solve the problem by making it mandatory for every household to pay a fixed charge every month for the public TV station irrespective of whether someone watches it or nor

c) The market can solve this problem by making the local public TV available only to the people who are willing to pay for it. The existence of cable TV solves the problem of 'free ridership' as cable TV is available only to the people who are willing to pay for it. None can use this without paying the periodic subscription fees.