Which of the following best describes the concept of the tragedy of the commons?

• A. A market fails to provide a public good because individuals can benefit without paying for it.
• B. Individuals overuse a shared resource because they do not bear the full cost of their actions, leading to resource depletion.
• C. Government intervention leads to inefficiency in the allocation of private goods.
• D. Firms collude to restrict output and raise prices in an oligopolistic market.

Answer: (B)

Verified step by step guidance

1. Understand that the tragedy of the commons is a concept in microeconomics describing a situation where individuals, acting independently according to their own self-interest, overuse and deplete a shared resource.
2. Recognize that this occurs because each individual does not bear the full cost of their consumption; instead, the cost is spread among all users of the resource.
3. Note that this leads to overconsumption and eventual depletion or degradation of the resource, which is inefficient from a societal perspective.
4. Distinguish this concept from other market failures such as free-riding on public goods, government intervention inefficiencies, or collusion among firms, which are different economic phenomena.
5. Conclude that the best description of the tragedy of the commons is: 'Individuals overuse a shared resource because they do not bear the full cost of their actions, leading to resource depletion.'