This is the situation in which individuals exhaust a common resources by acting in their own immediate self-interest. For example, if everyone fishes in a lake every day, there will eventually be no fish in that lake.

This is the situation in which individuals exhaust a common resources by acting in their own immediate self-interest. For example, if everyone fishes in a lake every day, there will eventually be no fish in that lake.

• A. Tragedy of the Commons
• B. Free-rider problem
• C. Moral Hazard
• D. Collective Action Problem

Answer: (A)

The situation shows people overusing a shared resource because each person acts in their own immediate self-interest, and as a result the resource becomes depleted. This pattern is the tragedy of the commons: when a common-pool resource like a lake is open to many users, each fisher benefits from catching as much as possible, but collective overuse reduces or eliminates the resource for everyone. This differs from the free-rider problem, where someone benefits from a public good without contributing to its provision; the focus there is on payment or effort, not on depleting a resource. Moral hazard involves taking more risks because someone else bears the consequences, not on overuse of a common resource. A collective action problem is a broader category about coordination failures to achieve a shared goal, whereas the tragedy of the commons is the specific overuse/depletion caused by individual self-interest in a shared resource.

The situation shows people overusing a shared resource because each person acts in their own immediate self-interest, and as a result the resource becomes depleted. This pattern is the tragedy of the commons: when a common-pool resource like a lake is open to many users, each fisher benefits from catching as much as possible, but collective overuse reduces or eliminates the resource for everyone.

This differs from the free-rider problem, where someone benefits from a public good without contributing to its provision; the focus there is on payment or effort, not on depleting a resource. Moral hazard involves taking more risks because someone else bears the consequences, not on overuse of a common resource. A collective action problem is a broader category about coordination failures to achieve a shared goal, whereas the tragedy of the commons is the specific overuse/depletion caused by individual self-interest in a shared resource.