Explain the effect of a usury law.
What will be an ideal response?
A usury law puts a ceiling on the interest rate that can be charged on loans; it may forbid charging interest entirely. To be effective, the ceiling must be below the equilibrium level of interest. Since supply of loans for capital resources is positively sloped, it intersects the downward-sloping demand curve for funds at some equilibrium interest rate. If the usury ceiling is below the equilibrium rate, the quantity of funds demanded by borrowers will be in excess of the quantity of funds lenders are willing to supply.
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The following price-quantity coordinates for gold used by U.S. dentists were observed: P = $875/ounce, Q = 342,000; P = $200/ounce, Q = 706,000. These points most likely lie along the
A. supply curve for gold for dental use. B. demand curve for dental use. C. equilibrium curve for dental use. D. production possibilities curve for dental use.
Asymmetric information can lead to the ________-informed parties to try to take advantage of the ________-informed parties, which can cause ________.
A) better; less; moral hazard, but not adverse selection B) better; less; moral hazard and adverse selection C) less; better; adverse selection, but not moral hazard D) less; better; moral hazard, but not adverse selecti
Which of the following is an example of a final good or service?
a. Bricks purchased by a company for constructing houses b. Wheat purchased by a bakery c. Steel purchased by a company for manufacturing cars d. A cup of coffee bought at a restaurant e. A used car bought by a person
When firms are faced with making strategic choices in order to maximize profit, economists typically use ____ to model their behavior
a. monopoly theory b. game theory c. cartel theory d. the theory of perfect competition