, ECS2606 Assignment 2 (COMPLETE ANSWERS) Semester
1 2025 (157760) - DUE 22 April 2025; 100% correct
solutions and explanations.
1.1 You want to clean up a lake where ten households live.
Explain the problem of free riding given that you want to charge
each household the same amount for cleaning the lake. (10)
The problem of free riding arises in this situation because
cleaning the lake is a public good, meaning it is non-
excludable (no one can be prevented from enjoying a clean
lake) and non-rivalrous (one person’s enjoyment of a clean lake
does not reduce another’s enjoyment). Given these
characteristics, some households may attempt to benefit from
the lake cleanup without contributing to the costs.
Explanation of the Free Rider Problem:
1. Lack of Incentive to Pay
o Since the lake is a shared resource, each household
knows that whether they pay or not, they will still
benefit if the cleanup happens. This creates an
incentive for some households to refuse to pay,
hoping that others will cover the cost.
2. Under-Provision of the Cleanup
o If too many households refuse to contribute, the total
collected funds may be insufficient to clean the lake
properly. This leads to an inefficient outcome where
the lake remains polluted, even though all households
would have preferred a clean lake.
3. Fairness and Disputes
1 2025 (157760) - DUE 22 April 2025; 100% correct
solutions and explanations.
1.1 You want to clean up a lake where ten households live.
Explain the problem of free riding given that you want to charge
each household the same amount for cleaning the lake. (10)
The problem of free riding arises in this situation because
cleaning the lake is a public good, meaning it is non-
excludable (no one can be prevented from enjoying a clean
lake) and non-rivalrous (one person’s enjoyment of a clean lake
does not reduce another’s enjoyment). Given these
characteristics, some households may attempt to benefit from
the lake cleanup without contributing to the costs.
Explanation of the Free Rider Problem:
1. Lack of Incentive to Pay
o Since the lake is a shared resource, each household
knows that whether they pay or not, they will still
benefit if the cleanup happens. This creates an
incentive for some households to refuse to pay,
hoping that others will cover the cost.
2. Under-Provision of the Cleanup
o If too many households refuse to contribute, the total
collected funds may be insufficient to clean the lake
properly. This leads to an inefficient outcome where
the lake remains polluted, even though all households
would have preferred a clean lake.
3. Fairness and Disputes
