question archive 1)State true or false and justify your answer: The inability to exclude individuals from the benefit of a good in which they did not contribute to its costs is known as a free-rider problem
1)State true or false and justify your answer: The inability to exclude individuals from the benefit of a good in which they did not contribute to its costs is known as a free-rider problem
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1)State true or false and justify your answer:
The inability to exclude individuals from the benefit of a good in which they did not contribute to its costs is known as a free-rider problem.
2)Good X is characterized by nonrivalry and nonexcludability; good Y is characterized by neither. If both are economically desirable, then
a. both can be efficiently provided by private firms.
b. X can be efficiently provided by private firms but Y must be financed through taxes.
c. Y can be efficiently provided by private firms but X must be financed through taxes.
d. both must be financed through taxes.
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1)True.
The free-rider problem arises with public goods as we cannot exclude anyone from consuming such goods. Due to this, individuals who did not pay for the good can also use it. For example, everyone can use street lights even if they do not pay for them.
2) Correct Option: c. Y can be efficiently provided by private firms but X must be financed through taxes.
Explanation: Good X is a public good due to its characteristics of being non-rival and non-excludable while Good Y is a private good as it do not posses any of these characteristics. Therefore, Good X must be provided by the government through taxes while good Y must be provided through the private firms.
