A Small Community Has 40 People, Each of Whom Has

question 9

Multiple Choice

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.

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Definitions:

Trading Portfolio

A collection of financial assets such as stocks, bonds, commodities, and currencies that are held primarily for the purpose of selling them in the near term with the objective of profit.

Fair Value Method

An accounting approach for valuing and reporting assets and liabilities on the basis of estimates of their current fair market prices.

Available-For-Sale Debt Investments

Financial assets in the form of debt securities that a company intends to hold for a period but are not classified as held-to-maturity or trading securities.