Define the term "property rights." Explain why the lack of well-defined and enforceable property rights is detrimental to the smooth functioning of a market system
What will be an ideal response?
The term "property rights" refers to the rights that individuals or firms have to the exclusive use of their resources, within the confines of the law. Well-defined and enforceable property rights provide the incentive for people and firms to invest resources and undertake risks. This encourages the production of a wide range of goods and services. Without property rights and the means to enforce these rights, no person would want to undertake such a risk.
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In the market for automobile insurance, adverse selection implies that
A) those who are insured might take greater risks. B) those who are uninsured might take greater risks. C) insured and uninsured alike will take greater risks. D) drivers with greater risks are more likely to buy insurance.
The real wealth effect provides a partial explanation for why the aggregate demand curve slopes downward. Which of the following statements best explains the real wealth effect?
A. At a lower price level domestically produced items are relatively less expensive than foreign goods and therefore are in greater demand. B. At a lower price level the real interest rate tends to be lower, and thus the quantity of investment goods demanded is larger. C. At a lower price level consumers will buy less because of a reduction in the real money supply. D. At a lower price level the purchasing power of accumulated savings is larger, and thus consumers will purchase more goods.
A manager in charge of new product development can hire engineers and market researchers. The annual salary of an engineer is $40,000 while a market researcher receives $20,000. The marginal contribution of engineers and market researchers are:
Based on the above information, how should a manager with an annual budget of $140,000, allocate this budget in order to maximize the number of new products developed?
A. Hire two engineers and three market researchers B. Hire three engineers and one market researcher C. Hire one engineer and five market researchers D. Hire four engineers and four market researchers
Number of Workers Total Product Marginal Product 0 0 --- 1 8 8 2 10 3 25 4 30 5 3 6 34 The marginal product of the fourth worker Multiple Choice
A) is 7 1/2. B) is 7. C) is 5. D) cannot be calculated from the information given.