Author Question: How does the principle of minimum differentiation relate to the free-rider problem? What will be ... (Read 104 times)

robinn137 · **on:** Jun 29, 2018

How does the principle of minimum differentiation relate to the free-rider problem?

What will be an ideal response?

Question 2

Because we cannot observe or measure utility

A) the predictions of marginal utility theory cannot be verified.
B) marginal utility theory is incomplete and so its predictions might not be valid.
C) marginal utility theory must be derived from assumptions about demand curves because demand curves can be measured.
D) None of the above answers are correct.

sabina576 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The free-rider problem requires that the government intervene so that an efficient level of a public good is produced. Often the government itself provides the public good. In this case, politicians are the government officials that are responsible for deciding which and what amounts of public goods are produced. In order to collect the most votes, politicians choose policies proposing the provision of certain public goods that are similar to competing politicians. The tendency for competitors to choose similar policies is the principle of minimum differentiation. In this case, the principle of minimum differentiation means that political parties propose to produce similar quantities of public goods because these proposals attract the maximum number of votes.

Answer to Question 2

D