FREE-RIDER PROBLEM-Explain the free-rider problem-How public provision can help to overcome that problem

DEFINITION Public good is both nonrival and

nonexcludable. A public good benefits everyone, and no one can be excluded from its benefits

When fireworks are displayed in a public location, it's considered as a public good since everyone can see it for free

DEFINITION A free rider is a person who enjoys the

benefits of a good or service without paying for it.

DEFINITION Marginal social benefit is the sum of the

marginal benefits of all the individuals at each quantity.

Marginal social cost is the sum of the marginal costs of all individuals at each quantity

FREE RIDER PROBLEM A free rider problem is a situation in which

individuals or businesses are receiving benefits without actually contributing anything, thus creating an unfair balance in the distribution of revenues or other resources

- Non -production - Under – production - Excessive

FREE RIDER PROBLEM The free rider problem is that the

economy would provide an inefficiently small quantity of a public good

Marginal social benefit from the public good would exceed its marginal social cost

Resources can be used more efficiently by increasing a number of goods

FREE RIDER PROBLEM

SOLUTIONS

Tax Appealing To People’s Altruism. Make A Public Good private Legislation

TAX Treat the many

beneficiaries as one consumer and then divide the cost equally.

2. Appealing To People’s Altruism For services which

have relatively low cost, asking for donations to raise funds

3. Make A Public Goods private A beautiful garden could

be seen as a public good. However, if you erect a high barrier and limit entrance to those willing to pay, it loses its feature as a public good and becomes a private good.

4 .Legislation The government

have tried various options such as:

Quotes Legislation Compensation

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