Question

Market failure associated with public goods A group of university students buys coconuts from a farmers' market. The students consume the meat of the coconuts for food and use the shells to make sculptures. These sculptures are placed in a public park that any student can visit. The park sustains itself through students' donations. Some individuals have no incentive to donate to the park and will, instead, depend on those who do donate. This is an example of which of the followingf?a. The free-rider problemb. A negative externallyc. Efficient allocation of coconutsd. Overuse of coconuts

Answer 1

Answer:

The correct answer is letter "A": The free-rider problem.

Explanation:

The free-rider problem refers to someone being able to get what others pay more for less or just for free. The problem comes when people are unable to pay their fair share for something the majority of others pay for. When it comes to public goods, this is most prominent.

Answer 2

Answer:

a. The free-rider problem

Explanation:

The free-rider problem is when people benefit from using a public good but do not pay to enjoy the benefits. The students benefit from the park by visiting the park but do not donate.

Negative externality is when the benefits of economic activities to third parties is less than the cost.

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