There Are 12 Families in a Gated Community That Are

Multiple Choice

There are 12 families in a gated community that are affected by air pollution from a local factory. The pollution could be reduced if the company spent $24,000 on upgraded ventilators. The company agrees to install the ventilators if the affected families contribute the $24,000. Since there are no legal restrictions governing the factory's air pollution the negotiations fail. This outcome is an example of the

A) free-rider problem.
B) drop-in-the-bucket problem.
C) Coase theorem.
D) problem that arises when property rights are not defined.