The Fact That It Is Difficult to Prevent People from Using

question 3

Multiple Choice

The fact that it is difficult to prevent people from using public goods once they are produced, even if they have not paid, is known as

• A) the over- consumption problem.
• B) the easy- rider problem.
• C) moral hazard.
• D) adverse selection.
• E) the free- rider problem.

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Definitions:

WACC

Weighted Average Cost of Capital; a formula used to calculate a business's cost of capital, where every type of capital is weighted according to its proportion.

Yield-to-Maturity

The total return anticipated on a bond if the bond is held until its maturity date, expressed as an annual rate.

Tax Rate

The percentage defining how much of a person's or business's income is allocated to taxes.

Bond Issues

Financial securities issued by corporations or governments to raise capital by borrowing from investors, to be repaid with interest at maturity.