The Overuse of a Common Resource Relative to Its Economically

question 118

Multiple Choice

The overuse of a common resource relative to its economically efficient use is called

• A)the free-rider problem.
• B)the Tragedy of the Commons.
• C)a public good.
• D)cost-benefit analysis.

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Definitions:

Utility Function

An economic model that describes how consumers rank different bundles of goods according to the levels of happiness or satisfaction they provide.

Risk Neutral

A term describing an individual or entity that does not prefer or avoid risk, implying indifference to the amount of risk associated with any investment.

Risk Averse

A characteristic of individuals who prefer to avoid risk and would rather choose an option with a lower but more certain return than an option with a higher but uncertain return.

Von Neumann-Morgenstern

Pertains to a theorem used in expected utility theory, which provides an axiomatic basis for the selection of optimal choices under uncertainty.