When One or More Individuals in the Group Decide to Withhold

question 75

Multiple Choice

When one or more individuals in the group decide to withhold effort in the belief that others are planning to withhold effort,the effect is called the:

• A) free rider effect
• B) slowdown effect
• C) sucker effect
• D) bad apple effect

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Definitions:

Substitution Effect

The economic principle that as prices rise or incomes decrease, consumers will replace more expensive items with less costly alternatives.

Budget Constraints

The limitations on the consumption bundles that a consumer can afford based on their income and the prices of goods and services.

Law of Demand

The principle that, all other factors being equal, as the price of a product decreases, the quantity demanded of the product will increase, and vice versa.

Budget Constraint

An economic model that represents all the combinations of goods and services a consumer can afford given their income and prices of goods.