Which of the Following Statements Is True of the Free

question 200

Multiple Choice

Which of the following statements is true of the free rider problem?

• A)People consume a pure public good without payment, even though the good may not be produced if no one chooses to pay.
• B)The marginal cost of allowing additional consumers to consume a public good is zero.
• C)High income individuals subsidise the production of goods, such as education, that make society better off.
• D)Markets fail to allocate resources efficiently when benefits outweigh costs.

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Definitions:

Diminishing-Balance

A method of calculating depreciation that results in larger depreciation charges in the early years of an asset's life and smaller charges in the later years.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life to account for the reduction in value due to wear and tear, age, or obsolescence.

Straight-Line Method

A method of calculating depreciation by evenly spreading the cost of an asset over its useful life.

Freight Charges

Fees paid for the transportation of goods from one place to another, typically charged by shipping companies.