Question

A free-rider problem exists when someone receives a benefit without having to pay for it. Public goods that a society deems essential are normally provided by the government and funded by tax revenues. Since many people pay taxes, this almost eliminates the free-rider problem." How does government funding of public goods address the free-rider problem?

a) Intensifies the free-rider problem
b) Eliminates the free-rider problem
c) Causes a decline in public goods supply
d) Has no effect on the free-rider problem

Answer 1

The government funding of public goods addresses the free-rider problem by requiring everyone to contribute through taxes.

Step-by-step explanation:

The government funding of public goods addresses the free-rider problem by requiring everyone to contribute through taxes. When the government uses tax revenues to provide public goods, it ensures that everyone who benefits from these goods is also contributing to their funding. This eliminates the free-rider problem because individuals cannot simply enjoy the benefits of public goods without paying their fair share.