The Free Rider Problem Suggests That a Producer Will Tend

question 108

Multiple Choice

The free rider problem suggests that a producer will tend to:
i.produce more than the optimal quantity of a public good.
ii.produce less than the optimal quantity of a public good.
iii.produce the optimal quantity of a public good if it is funded out of tax revenue.

• A) (i) only
• B) (ii) only
• C) (i) and (iii) only
• D) (ii) and (iii) only

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Definitions:

Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership interest of shareholders.

Note Payable

An obligation in the form of a promissory note, which requires the borrower to pay back the loan or debt to the lender at a future date.

General Journal

The primary accounting record used to record all types of transactions not assigned to other journals.

Equipment

Tangible property that is used in the operations of a business and has a useful life of more than one year.