The free-rider problem is the inability of private markets to achieve the efficient level of production of
A) rival goods.
B) excludable goods.
C) public goods.
D) private goods.

Question

Quizplus · Accepted Answer

The free-rider problem arises specifically in the production of public goods, which are non-excludable and non-rivalrous. Private markets cannot achieve the efficient level of production of public goods because individuals have no incentive to pay for a good that they can benefit from even if they don't contribute to its production. This leads to the underproduction of public goods, and government intervention is often necessary to provide them.

The Free-Rider Problem Is the Inability of Private Markets to Achieve