The idea that individuals acting in their own self-interest can deplete a shared resource is known as the

• A. Tragedy of the Commons
• B. Free-rider problem
• C. Moral Hazard
• D. Pareto Efficiency

Answer: (A)

The tragedy of the commons explains why people acting in their own self-interest can exhaust a shared resource. When a resource is open to everyone, each person gains the full benefit from using a bit more, while the cost of overuse is spread across all users. Over time, everyone's incentive to grab a bit more leads to overuse and depletion, even though everyone would be better off if usage were limited. Think of a shared pasture or a fishery: individual herders or fishermen push their own limits, and the resource wears down for the entire community.

That’s why this option fits best. The other terms describe different situations: the free-rider problem is about benefiting from a public good without paying for it, which can lead to under-provision rather than depletion; moral hazard involves taking more risk because someone else bears the cost; Pareto efficiency is a condition where you can’t make someone better off without making someone else worse off, not about overuse of a shared resource.