Author Question: If the market illustrated in the above figure was a perfectly competitive market with the MC curve ... (Read 41 times)

Pineapplelove6 · **on:** Jun 29, 2018

If the market illustrated in the above figure was a perfectly competitive market with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be

A) P3 and Q1.
B) P5 and Q1.
C) P1 and Q1.
D) P4 and Q3.

Question 2

What is the free-rider problem? What results from the free-rider problem? What is a solution to the free-rider problem?

What will be an ideal response?

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

Answer to Question 1

D

Answer to Question 2

The free-rider problem occurs when people enjoy the benefits from a good or service without paying for it. The free-rider problem occurs with public goods because no one can be excluded from using them without paying for them. As a result, the free-rider problem is that the private market produces too little of these goods. To produce the efficient quantity, the government can intervene by taxing people and using those funds to pay for the public good.