1)Briefly, describe the free-rider problem and provide a real-life example.

2) Which of the following statements is true?

A. For a monopoly, there is an increase in total welfare for society compared to perfect competition.

B. There is no producer surplus associated with perfect price discrimination.

C. There is a deadweight loss associated with perfect price discrimination.

D. In perfect price discrimination, the firm is able to convert the entire area of consumer surplus that existed under perfect competition into producer surplus.

1)A free rider is an issue wherein an individual benefits from a good without never at any point paying for its usage. This issue happens with public goods.

The free-rider problem alludes to the circumstance when a person under-reports their demand for the public good, and thereby consumes and benefits from it without paying for it.

Examples, there is a lake in a village where villagers use water for different activities such as fields, cooking use, and more. The lake is an open-source and everyone makes use of it without paying for it. The problem will occur when the lake starts getting dirty and no one extends any efforts to clean it. They can't overuse it too.

Or let's take a household example, cooked food for the whole family, bought the ingredients, set the dining table, and then washed the dishes and the kitchen also. This is the typical example of the free-rider problem. Other family members contributed nothing to all of this.

2)

The correct option is D. In perfect price discrimination, the firm is able to convert the entire area of consumer surplus that existed under perfect competition into producer surplus.

Explanation:

Under perfect price discrimination, a monopolist has an incentive to charge different prices according to the willingness to pay of a consumer. A monopolist will charge lower price to the poor people and charge higher price to the rich people so that he can convert the overall market surplus into producer surplus.