Correct answer is "a. It requires a constant exponencial expansion of new investment topay existing obligation, which cannot continue, and therefore the promise of earnings is fraudulent."
A pyramid scheme is one in which a certain amount of money is demanded from new investors and then is applied to cover previous liabilities from other investors instead of being invested in productive income generating activities.
The system needs a constantly growing base of new entrants to keep itself working and, as the number of people who can enter such arrangement is limited, it eventually becomes unsustainable.
