The Free-Rider Problem Applies

question 127

Multiple Choice

The free-rider problem applies

• A) to rival and excludable goods.
• B) to common resources.
• C) to nonrival and nonexcludable goods.
• D) when marginal social benefit exceeds marginal private benefit.
• E) when marginal social cost equals marginal private cost.

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Definitions:

Real Rate of Interest

The yield a investor foresees receiving, once inflation adjustments are made.

Term Structure

The term structure represents the relationship between the interest rates and the different maturities of debt securities, often depicted in the form of a yield curve.

Junk Bonds

High-risk and high-yield bonds rated below investment grade by credit rating agencies.

Subordinated Debt

A class of debt which ranks below other debts with regard to claims on assets or earnings.