Which of the following best explains why the free rider problem is less likely to occur in a moneyless economy that relies on trade or barter?

• A. The tragedy of the commons is eliminated in barter economies.
• B. Barter economies always have strict government enforcement to prevent free riding.
• C. Goods and services are exchanged directly, making it harder for individuals to benefit without contributing.
• D. Moneyless economies do not require cooperation among individuals.

Answer: (C)

Verified step by step guidance

1. Understand the free rider problem: it occurs when individuals consume a good or service without paying for it or contributing to its provision, which is common in public goods scenarios.
2. Recognize that in a moneyless economy relying on barter, goods and services are exchanged directly between parties without using money as a medium.
3. Analyze how direct exchange (barter) requires mutual agreement and contribution from both parties, making it difficult for someone to benefit without offering something in return.
4. Contrast this with monetary economies where individuals can sometimes consume public goods without directly paying, leading to free riding.
5. Conclude that the direct reciprocity in barter systems reduces the likelihood of free riding because each participant must contribute something of value to receive something in return.