The Free-Rider Problem Occurs Because

question 32

Multiple Choice

The free-rider problem occurs because

• A) members of Congress are presented with many opportunities to amend a piece of legislation.
• B) the government subsidizes most forms of transportation in the United States.
• C) the benefits of a group's actions are available only to a specific segment of society.
• D) the benefits of a group's actions are broadly available and cannot be denied to nonmembers.
• E) members of Congress listen only to organized interest groups and not to public opinion polls.

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Definitions:

Swap Contract

An agreement between two parties to exchange sequences of cash flows for a set period of time according to predetermined terms.

Forward Contract

An agreement customized for two individuals to either buy or sell a particular asset at a price decided upon for a future date.

Hedging

A strategy used to reduce or eliminate the risk of adverse price movements in an asset, often by taking an offsetting position in a related security.

Transformation Process

The series of actions or operations conducted in manufacturing or service environments that convert inputs into finished products or outcomes.