Multiple Choice
Making customers pay per use of a public good is inefficient because:
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8. The Types of Goods
The Free Rider Problem and the Tragedy of the Commons
Multiple Choice
Which of the following scenarios best explains the concept of the tragedy of the commons?
A
A company provides free Wi-Fi, and some users benefit without paying for the service.
B
Villagers overfish a shared lake, leading to depletion of fish stocks for everyone.
C
A farmer invests in new machinery to increase the productivity of their private land.
D
A government imposes a tax on pollution to reduce negative externalities.
Verified step by step guidance1
Step 1: Understand the concept of the tragedy of the commons. It occurs when individuals, acting independently according to their own self-interest, overuse and deplete a shared resource, leading to a loss for the entire group.
Step 2: Identify the key elements of the tragedy of the commons: a shared resource, individual incentives to overuse it, and the eventual depletion or degradation of that resource.
Step 3: Analyze each scenario to see if it involves a shared resource being overused or depleted due to individual actions without proper regulation or cooperation.
Step 4: Recognize that the scenario where villagers overfish a shared lake fits the tragedy of the commons because the lake is a common resource, and overfishing by individuals reduces fish stocks for everyone.
Step 5: Contrast this with other options: free Wi-Fi involves a public good but not depletion; investing in private land is about private property; and government pollution tax is a policy response to externalities, not an example of the tragedy itself.
