Math

QuestionGood X is highly desired by consumers. However, it is impossible to prevent non-payers from using the good once it is purchased by someone else. Therefore, good X is \qquad problem. \qquad and suffers from the a. Non-excludable; free-rider b. Non-rivalrous; over-consumption c. Excludable; private good d. Non-excludable; negative externality

Studdy Solution

STEP 1

What is this asking? Which pair of economic terms best describes a good that is hard to prevent people from using, even if they don't pay for it? Watch out! Don't mix up "non-excludable" and "non-rivalrous"—they sound similar but mean very different things!

STEP 2

1. Understand Excludability
2. Understand Free-Rider Problem
3. Analyze the Other Options

STEP 3

Hey everyone!
Let's break down this problem.
We're talking about a good that's *highly desired* but has a tricky problem: once someone buys it, it's tough to stop others from using it for free.
Think of a beautiful fireworks display.
Once it's up in the sky, everyone can enjoy it, whether they chipped in for the show or not!

STEP 4

This characteristic is called **non-excludability**.
It means it's difficult or impossible to *exclude* people from enjoying the good, even if they haven't paid for it.
So, we can immediately eliminate options c because *excludable* means the opposite of what we're looking for.

STEP 5

Now, let's think about what happens when people can use something without paying.
Some folks might decide, "Hey, if I can get it for free, why pay?" This is the classic **free-rider problem**!
People enjoy the benefits without contributing to the cost.

STEP 6

This matches the description in the problem perfectly!
Since the good is **non-excludable**, it's prone to the **free-rider problem**.

STEP 7

Option b mentions "non-rivalrous." A **non-rivalrous** good means one person's use doesn't diminish another person's ability to use it.
Think of a beautiful sunset—one person enjoying it doesn't prevent others from doing the same.
While this *could* be true for good X, the problem specifically focuses on the inability to prevent non-payers from using it, which is **non-excludability**, not **non-rivalrousness**.

STEP 8

Option d mentions "negative externality." A **negative externality** is a side effect that harms someone not directly involved in a transaction.
For example, pollution from a factory affects the air quality for everyone nearby.
While non-excludable goods *can* sometimes have negative externalities, the problem doesn't describe any harmful side effects.
It just highlights the difficulty of excluding non-payers.

STEP 9

The answer is a. **Non-excludable; free-rider**.
This pair of terms perfectly captures the nature of the good described in the problem: it's hard to prevent non-payers from using it, leading to the free-rider problem.

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