Which statement best describes the free rider problem?

Study for the AICP exam with the Planetizen AICP Test. Master concepts with multiple choice questions, hints, and explanations. Ace your exam!

Multiple Choice

Which statement best describes the free rider problem?

The idea at work is that when a good is public—meaning it’s non-excludable and non-rivalrous—people can benefit from it even if they don’t contribute their fair share. Because you can’t easily prevent non-payers from enjoying the good, there’s a tendency for individuals to under-contribute, hoping others will pick up the tab. This is the free rider problem, and it leads to under-provision of the public good unless something changes the incentives. So the best description is that someone benefits from the consumption of a public good without paying their full share. The other statements miss the mark because free riding is a feature of public goods, not private ones; taxes don’t magically remove the issue since under-contribution can still occur or be difficult to enforce; and the phenomenon isn’t about market structure like perfect competition.

The idea at work is that when a good is public—meaning it’s non-excludable and non-rivalrous—people can benefit from it even if they don’t contribute their fair share. Because you can’t easily prevent non-payers from enjoying the good, there’s a tendency for individuals to under-contribute, hoping others will pick up the tab. This is the free rider problem, and it leads to under-provision of the public good unless something changes the incentives.

So the best description is that someone benefits from the consumption of a public good without paying their full share. The other statements miss the mark because free riding is a feature of public goods, not private ones; taxes don’t magically remove the issue since under-contribution can still occur or be difficult to enforce; and the phenomenon isn’t about market structure like perfect competition.

More practice questions