Market failure associated with the free-rider problem is a result of:
A) a problem associated with pollution
B) benefits that accrue to those who don't pay
C) losses that accrue to providers of the product
D) a project in which costs exceed benefits

Question

Quizplus · Accepted Answer

The free-rider problem occurs when some individuals benefit from a public good or service without contributing to its cost. This creates a market failure because the provider of the good or service may not receive enough revenue to cover their costs, leading to underproduction or provision of the good or service. This is associated with the free-rider problem, which is described in option B. Option A refers to a specific type of externality, option C refers to losses for the provider (not necessarily associated with free-riders), and option D refers to a situation where a project is not efficient or profitable.

Market Failure Associated with the Free-Rider Problem Is a Result