Because of the Free-Rider Problem

question 189

Multiple Choice

Because of the free-rider problem,

• A)private markets tend to undersupply public goods.
• B)the federal government spends too many resources on national defense and not enough resources on medical research.
• C)fireworks displays have become increasingly dangerous.
• D)poverty has increased.

---

Definitions:

Opportunity Cost

The expense incurred by not selecting the next most favorable option when deciding or opting for one action instead of another.

Hourly Wage

The amount of money paid to an employee for one hour of work.

Leisure

Time free from work or duties, which can be used for relaxation, hobbies, or cultural activities.

Substitution Effect

The transformation in purchasing decisions resulting from changes in the relative pricing of goods, compelling consumers to replace one good with another.