A Local Campaign Is Asking for Contributions of $5

question 164

Multiple Choice

A local campaign is asking for contributions of $5.00 per citizen to fund the renovation of the boardwalk in Atlantic City following Hurricane Sandy. The total cost of the renovation is estimated to be $125 million. You decide not to contribute because your contribution would be so small relative to the total that it wouldnʹt make any difference whether you contribute or not. This is an example of the

• A) nonexcludable problem.
• B) nonrival in consumption problem.
• C) free-rider problem.
• D) drop-in-the-bucket problem.

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Definitions:

Selling Price

The amount of money a buyer pays to purchase a product or service.

Variable Costs

Expenditures that fluctuate relative to the quantity of output or services provided by a business.

Operating Cash Flows

Cash generated from a company's normal business operations, indicating its ability to generate sufficient positive cash flow to maintain and grow its operations.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales, indicating the potential for higher returns or risks.