A pyramid scheme is designed to pay off its earliest investors.

A pyramid scheme is designed to pay off its earliest investors.

• A. False
• B. True
• C. Not enough information
• D. It depends

Answer: (B)

Pyramid schemes are built so that the money paid by newer participants is used to pay returns to the earlier investors. This means the scheme is designed to deliver payouts to those who joined first, funded by those who come in later. That structure makes the statement true: the earliest investors are intended to be paid from the influx of new participants. The system relies on continual recruitment to keep funds flowing, which is why it collapses when recruitment falters. The other options don’t fit because the defining feature is precisely how payments are funded and prioritized, not a matter of information gaps or variable outcomes.

Pyramid schemes are built so that the money paid by newer participants is used to pay returns to the earlier investors. This means the scheme is designed to deliver payouts to those who joined first, funded by those who come in later. That structure makes the statement true: the earliest investors are intended to be paid from the influx of new participants. The system relies on continual recruitment to keep funds flowing, which is why it collapses when recruitment falters. The other options don’t fit because the defining feature is precisely how payments are funded and prioritized, not a matter of information gaps or variable outcomes.