(See Problem 2

question 19

Multiple Choice

(See Problem 2.) A small community has 40 people, each of whom has a wealth of $5,000. Each individual must choose whether to contribute $200 or $0 to the support of public entertainment for their community. The money value of the benefit that a person gets from this public entertainment is b times the total amount of money contributed by individuals in the community.

• A) If 40b > 1, everybody is better off if all contribute to the public entertainment fund than if nobody contributes, but if 40b < 1, everybody is better off if nobody contributes than if all contribute.
• B) Everybody is worse off if all contribute than if nobody contributes if b > 1, but if b < 1, everybody is better off if nobody contributes.
• C) If 40b > 1, there is a dominant strategy equilibrium in which everybody contributes.
• D) This game has a dominant strategy equilibrium in which nobody contributes anything for public entertainment.
• E) In order for there to be a dominant strategy equilibrium in which all contribute, it must be that b > 40.

---

Definitions:

Maturation

The process by which an investment reaches its full value or final due date.

Current Yield

The annual income return from an investment, expressed as a percentage of the current price of the security.

Bonds

Securities issued by corporations or governments that represent a loan from the investor to the issuer, typically paying periodic interest payments and returning the principal at maturity.

Maturation

The process of becoming mature, either physically, emotionally, or in the case of products and ideas, reaching a state of full development.