It May Be Easy for Two Neighbors to Agree to Drain

question 20

Multiple Choice

It may be easy for two neighbors to agree to drain a meadow, which they possess in common, to grow crops. However, when the meadow is much larger and reaches thousands of people,
The solution is more difficult because

• A) decision making is impossible with so many people.
• B) factions would form that would ultimately destroy the meadow for everyone.
• C) the problem of the tyranny of the majority would be impossible to control.
• D) the people involved would suffer from the free rider problem.

---

Definitions:

Prices

The amount of money required to purchase a good, service, or asset.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs.

Price-Taking Firms

Companies that accept the market price as given and have no power to influence that price due to competition and market structure.

Economic Profit

Profit calculated by subtracting both explicit and implicit costs from total revenues, providing a more complete measure of real profitability.