Answer to Question #219513 in Microeconomics for wema wright

Question

The free rider problem refers tothe temptation of individual to let others provide the public goods. With relevant example show that purely individualistic mechanisms will not generate the optimal amount of public good because of the free rider problem.

Answer 1

The Free Rider problem arises from people's failure to communicate their actual or authentic preferences for the public benefit through their contributions. Besides, the free rider problem is an economic concept that describes a market failure in which individuals have unrestricted access to services, resources, or goods. When a community wants to build a key bridge, for example, it might ask its citizens if they want to contribute to the construction costs. Everyone says they will because they understand that even if they never donate directly, they can make a difference. When there are a large number of riders, there may be an oversupply of products, services, or goods. There will be a problem with free riders as a result of this. This is a common occurrence when it comes to public goods (goods having non-excludable benefits).