Question

The market failure that observes when some goods are systemically overused and depleted is _____.

Answer 1

The market failure that observes when some goods are systemically overused and depleted is Tragedy of the Commons.

What is the tragedy of the commons?

• In the tragedy of the commons, every person has an incentive to use a resource, but at the price of every other person, and there is no means to prevent anyone from using it.
• It was initially conceived by considering what would occur if each shepherd, acting in his or her own self-interest, permitted their flock to graze on the common field.
• Everyone acting in what appears to be their own best interest leads to dangerous overconsumption (all the grass is eaten, to the detriment of everyone)
• Underinvestment (since, who is going to pay to sow new seed?) and finally, resource exhaustion are other possible outcomes of the issue.
• Every person who consumes an additional unit adversely hurts others—and themselves too—who can no longer profit from the resource due to the resource's overwhelming demand.
• The resource of interest is typically readily accessible to everyone without restrictions (i.e., the "commons").

To learn more about tragedy of the commons, refer to

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