Give an example of a common resource and describe the market failure risk.

• A. Example: Public park; risk: underuse due to lack of property rights.
• B. Example: Private tennis court; risk: depletion through crowding.
• C. Example: Fisheries; risk: overuse and depletion due to tragedy of the commons.
• D. Example: Clean air; risk: price distortions.

Answer: (C)

Common resources are rival but non-excludable: many people can use them, but one person’s use reduces what's left for others, and it's hard to exclude anyone from using them. When access is open, individuals have an incentive to harvest as much as they can today without bearing the full cost of future depletion, leading to overuse and eventual depletion—the tragedy of the commons. Fisheries are a classic example: oceans contain finite fish, and it’s hard to bar anyone from catching them, so each fisher tends to harvest aggressively. The combined effect is overfishing and shrinking fish stocks, which is the market failure risk described. Policies like quotas or transferable catch licenses aim to fix this by giving owners a stake in preserving the resource and aligning individual incentives with sustainable use.