There Are 1,000 Families in a Neighborhood That Are Affected

Multiple Choice

There are 1,000 families in a neighborhood that are affected by noise pollution from a local factory. The noise could be reduced if the company spent $5,000 on technological improvements. The company agrees to make these improvements if the affected families contribute the $5,000. However, because individuals will benefit from the reduction in noise whether they contribute or not, most people will not contribute and the firm will not make the improvements. This outcome is an example of the

A) free-rider problem.
B) drop-in-the-bucket problem.
C) Coase theorem.
D) collective action problem (that arises when there are too many parties involved) .