Question

Economic growth and public health programs benefit everyone. This is true even for those people who...

Economic growth and public health programs benefit everyone. This is true even for those people who may not be willing to pay or work for them. This is an example of which phenomena?

a. principal agent

b.free rider

c. cost benefit

d. negative externalities

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Answer #1

Principal agent problem occurs when one person takes decision on behalf of other and there is nothing such involved in the given scenario. There is no negative externality that is stopping the supply or having an adverse effect from the given scenario. There is no need to analyse cost benefit as there is no cost involved and everyone is getting benefit from it. however this scenario is a case of free rider because of the fact that people who are not even willing to pay for also get to utilise the benefits of the health program which means it can result in under provision and free rider problem arise.

Therefore (b) free rider is the answer.

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