Free rider a person who receives the benefit of a good but avoids paying for it

Free rider a person who receives the benefit of a

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Free rider: a person who receives the benefit of a good but avoids paying for it If good is not excludable, people have incentive to be free riders, because firms cannot prevent non-payers from consuming the good. Result: The good is not produced, even if buyers collectively value the good higher than the cost of providing it.
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Public GoodsIf the benefit of a public good exceeds the cost of providing it, government should provide the good and pay for it with a tax on people who benefit. Problem: Measuring the benefit is usually difficult. Some examples of public goods:National defense Knowledge created through basic researchFighting poverty
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Common ResourcesLike public goods, common resources are not excludable .Can’t prevent free riders from usingLittle incentive for firms to provideRole for govt: seeing that they are providedAdditional problem with common resources: rival in consumption Each person’s use reduces others’ ability to useRole for govt: ensuring they are not overusedSome examples of common resources:Clean air and waterCongested roadsFish, whales, and other wildlife
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The Tragedy of the CommonsA parable that illustrates why common resources get used more than is socially desirable.
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