Economics • Economic BasicsMedium
What is meant by the 'Tragedy of the Commons' in environmental and resource economics?
A. Public goods are undersupplied because private firms cannot charge non-payers.
B. Individuals with access to a shared resource act in their own self-interest and, contrary to the common good, ultimately deplete or ruin that resource.✓ Correct Answer
C. Monopolies charge higher prices and restrict output compared to competitive markets.
D. Government intervention in price controls invariably creates deadweight loss.
💡 Solution & Explanation
The Tragedy of the Commons describes an economic and environmental problem where individual users acting independently according to their self-interest ultimately deplete a shared, finite resource, contrary to the long-term best interests of all users. Public goods are characterized by non-excludability and non-rivalry.
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