Individuals Want Nonexcludable Public Good X, but the Market Does

question 64

Multiple Choice

Individuals want nonexcludable public good X, but the market does not provide it because of the free rider problem.  Government overcomes the free rider problem by ______________ individuals and then either producing good X itself or paying someone to produce it.

• A)forcing individuals to work longer hours
• B)taxing
• C)surveying
• D)subsidizing

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Definitions:

All-Equity Firm

A company that finances its operations and investments solely through equity without any debt financing.

Exercise Price

The price at which the holder of an options contract may buy (call) or sell (put) the underlying security.

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a specified price before a certain date.

Conversion Price

The price per share at which a convertible security, such as convertible bonds or preferred shares, can be converted into common stock.