Question 12
[Maximum number: 1]
Which policy is most likely to solve the free rider problem caused by public goods?
A
an advertising campaign
B
a direct provision by the government
C
a minimum price
D
a tax on a substitute good
CAIE A-Level Economics 3.1.1 Public Goods Non-provision
Practise using non-excludability, non-rivalry and free riding to explain why markets may not provide public goods and why governments finance direct provision.
How this is tested
- identify non-excludability and non-rivalry as the defining features of a public good
- explain how free riding prevents firms from charging users and creates market non-provision
- apply government finance or direct provision to flood defences while recognising opportunity cost