Answer to Question #217913 in Microeconomics for Vickie

Question

The free rider problem refers to the temptation of individuals to let others provide the public goods , with relevant example show that purely individualistic mechanisms will not generate the optimal amount of a public good because of the free rider problem (10 marks)

Answer 1

People's failure over communicating their true or real preferences for public good via their contributions results the Free Rider issue.

When a community is wishing to establish a critical bridge, for instance, it may inquire from its residents whether they need to contribute to building costs. Every person says they will, as they familiarize that even when they never contribute personally, they will make a change.