Asked by Mariana Rivera on May 01, 2024
Verified
There are 3,000 families in a small town that are affected by air pollution from a local factory. The air pollution could be reduced if the company spent $10,000 on upgraded ventilators. The company agrees to install the ventilators if the affected families contribute the $10,000. However, because individuals will benefit from the reduction in air pollution whether they contribute or not, most people will not contribute and the firm will not install the ventilators. This outcome is an example of the
A) free-rider problem.
B) drop-in-the-bucket problem.
C) Coase theorem.
D) collective action problem (that arises when there are too many parties involved) .
Free-Rider Problem
A situation where individuals consume a public good without contributing to its cost, potentially leading to underproduction or depletion of that good.
Air Pollution
The presence of harmful or excessive quantities of substances in the air, potentially harmful to human health and the environment.
Ventilators
Medical devices used to assist or control breathing by delivering air or a mixture of gases to the lungs.
- Recognize and elucidate market inefficiencies associated with public goods, inclusive of the free-rider issue.
- Explain the various steps and obstacles associated with financing and delivering infrastructure or services to the public.
- Clarify the importance of personal input in group efforts and the associated challenges.
Verified Answer
Learning Objectives
- Recognize and elucidate market inefficiencies associated with public goods, inclusive of the free-rider issue.
- Explain the various steps and obstacles associated with financing and delivering infrastructure or services to the public.
- Clarify the importance of personal input in group efforts and the associated challenges.
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