The Free-Rider Problem Plagues Public Goods Because

question 81

Multiple Choice

The free-rider problem plagues public goods because

• A) public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society.
• B) once public goods are produced it is not possible to exclude anyone from consuming these goods.
• C) the government can refuse to serve a citizen.
• D) the public doesn't care about public goods.

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Definitions:

Common Shares

Equities representing ownership interests in a company, entitling holders to a share in the company's profits and voting rights in certain decisions.

Straight-Line Depreciation

An accounting method that allocates the cost of an asset evenly over its useful life.

Voting Stock

Shares in a company that give the shareholder the right to vote on company matters, such as electing the board of directors.

Fair Value Option

An election that allows companies to report specific financial assets and liabilities at their fair values, with changes in fair value recognized in the income statement.