Question

One way to avoid the free rider problem is A. through mandates. B. for the government to provide the good or service. C. to use social pressure. D. All of the above.

Answer 1

Answer: Option (D) is correct.

Explanation:

Free rider problem is the problem in which some individuals get benefits from the good and services that are owned by someone else but those individuals who are enjoying, doesn't pay anything for the benefit that they received from the goods and services.

Public goods are generally considered as a non-rival and non-excludable. There are some free rider problem arises in the provision of public goods, if the goods are distributed by a group.

If goods are distributed by the government then this problem of free rider could be resolved because government distributed goods at a large scale, so government can charge a price in terms of direct and indirect taxes for the provision of public goods.

Mandate also resolved the problem of free rider because through mandate every person need to pay for using the public good.

Social pressure also resolved the problem of free rider. If there are social pressure that people won't be able to use the provided goods and services until they pay the minimum amount for that good.

Therefore, option (D) is correct.