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

question 58

Multiple Choice

Which of the following scenarios best describes a tragedy of the commons problem?

• A) Neighborhood residents discover strawberry plants in the flower beds at the city park.
• B) Illegal immigrants who do not pay taxes benefit from tax- funded police patrols.
• C) Pacifists become forced riders in tax hikes to fund national defense plans.
• D) There is overcrowding on public beaches.

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Definitions:

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, a measure of how revenue growth translates into growth in operating income.

Variable Costing

A managerial accounting method that includes only variable production costs (materials, labor, and overhead) in product costs, treating fixed manufacturing overhead as an expense of the period.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenues.