What Is the Free Rider Problem? Practice Questions

1. Which of the following describes a free rider problem? *

a. Four roommates want to buy a new couch, but can’t afford it. If there were a fifth roommate, they could afford it, but there isn’t.

b. Four roommates want to buy a new couch. They need all four to afford it but if all four split the use of it, none of them will get enough value from the couch to be worth their share of the cost.

c. Four roommates want to buy a couch, but aren’t sure who will get to keep it once they go their separate ways. The cost of having to figure that out ahead of time disincentivizes them from buying the couch.

d. Four roommates want to buy a couch, but each figures that if he or she just lets the other three pay for it, he or she will still be able to use it once it's bought. They don’t buy the couch.

2. Public goods __________. *

a. Can only be provided by government

b. Provide value even to users who don’t pay for them

c. Cover everyone within a geographic region

d. All of the above.

3. What is the result of the free rider problem? *

a. Public goods are underprovided.

b. Public goods are overprovided.

c. Public goods are arbitrarily priced.

d. People who should pay for public goods get them for free.

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What Is the Free Rider Problem? Practice Questions

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