Which of the Following Scenarios Describes How a Tragedy of the Commons

question 10

Multiple Choice

Which of the following scenarios describes how a tragedy of the commons problem occurs?

• A) A radio station goes out of service because it cannot raise enough money from advertising.
• B) Illegal immigrants who do not pay taxes benefit from tax-funded school systems.
• C) Farmers harvest deer out of season rather than pay the high price of beef.
• D) The establishment of tradable pollution allowances helps reduce pollution.

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Definitions:

Systematic Risk

Systematic risk refers to the risk inherent to the entire market or market segment, which cannot be mitigated through diversification.

CAPM

A financial theory that calculates the expected return on an investment based on its risk relative to the market as a whole.

Expected Rate

The anticipated return on an investment, considering potential risks and historical returns.

Security's Beta

A measure of a security's volatility in relation to the overall market, indicating the risk associated with the investment.