Multiple Choice
Which of the following exemplifies the free-rider problem for interest groups?
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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 best describes the concept of the tragedy of the commons?
A
A market fails to provide a public good because individuals can benefit without paying for it.
B
Individuals overuse a shared resource because they do not bear the full cost of their actions, leading to resource depletion.
C
Government intervention leads to inefficiency in the allocation of private goods.
D
Firms collude to restrict output and raise prices in an oligopolistic market.
Verified step by step guidance1
Understand that the tragedy of the commons is a concept in microeconomics describing a situation where individuals, acting independently according to their own self-interest, overuse and deplete a shared resource.
Recognize that this occurs because each individual does not bear the full cost of their consumption; instead, the cost is spread among all users of the resource.
Note that this leads to overconsumption and eventual depletion or degradation of the resource, which is inefficient from a societal perspective.
Distinguish this concept from other market failures such as free-riding on public goods, government intervention inefficiencies, or collusion among firms, which are different economic phenomena.
Conclude that the best description of the tragedy of the commons is: 'Individuals overuse a shared resource because they do not bear the full cost of their actions, leading to resource depletion.'
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