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Free riders and Pareto’s Efficiency Level for Public goods in perfect markets

Question:

Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

Summary:

This question is about what are free riders and how can they affect a perfectly competitive market. Free riders are those who do not pay for the goods or services, especially for public goods or services. Their effect on the whole economy can be studied through various graphs and Pareto efficient level, which represent their consumption and defaulting of payment for goods and services.

 

Word count: 204

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