Under Which One of the Following Situations Would You Be

question 17

Multiple Choice

Under which one of the following situations would you be better off?

• A)You have $10,000 in your savings account paying 5 percent per year,and unanticipated inflation is 8 percent per year.
• B)You have paid $500 for a $1,000 Canada savings bond that matures in 10 years,and unanticipated inflation is 10 percent per year.
• C)You lend a friend $1,000 at 6 percent to be repaid in one year,and unanticipated inflation is 7 percent during the year.
• D)You borrowed $2,500 at 7 percent to pay for this year's college expenses,and unanticipated inflation is 12 percent during the year.

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Definitions:

Free-rider Problem

A situation where individuals benefit from resources, goods, or services that they do not pay for, which can lead to underproduction or depletion of those resources.

Rivalry

The competitive relationship between firms in the market, striving to gain advantage over each other in terms of sales, market share, or innovation.

Nonexcludable

A characteristic of a good or service whereby it is not possible to prevent people who have not paid for it from having access to it.

Free-rider Problem

A situation in which individuals benefit from resources, goods, or services without paying for them, leading to underprovision of those goods or services.