economics medium True/False

The 'Free Rider Problem' is most commonly associated with private goods sold in competitive markets.

  1. True
  2. False

Answer: False

The free-rider problem occurs with public goods, where individuals have no incentive to pay for the good because they can consume it without paying, relying on others to foot the bill. This leads to the under-provision of the good by the free market, necessitating government intervention and taxation.

Topic Microeconomics - Market Failure
Exam Relevance UPSC Prelims, SSC CGL, Banking
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