In a corporation, the interests of the owners, who seek to maximize profits, may differ from the interests of the managers, who seek prestige and high income. This divergence would be considered:
A. a limited liability problem.
B. a free-rider problem.
C. a rationing problem.
D. a principal-agent problem.
Answer: D
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Why do convex indifference curve have a negative slope?
A) because to keep utility constant, a consumer must get more of one good if she is to give up some of the other B) because scarcity implies that it is not possible to consume more of one good without giving up some of the other C) because consumers take market prices as given D) because consumers face a budget constraint
The World Bank sorts countries into the following three major groups:
a. high-income economies, middle-income economies, low-spending economies b. high-spending economies, middle-spending economies, low-spending economies c. super-high-income economies, middle-income economies, low-income economies d. high-income economies, middle-income economies, zero-income economies e. high-income economies, middle-income economies, low-income economies
When the price of a good changes, the substitution effect occurs because:
a. the consumers' real income measured in terms of that good changes. b. the relative price of that good changes compared to other goods in the consumption bundle. c. the total utility of that good decreases. d. the marginal utility of that good decreases. e. consumers have an incentive to substitute irrational behavior for rational behavior.
The Fed uses policy targets of interest rate and/or money supply because
A. The inflation rate is controlled by Congress and the White House B. The target for the GDP growth rate is set by Congress C. It can affect the interest rate and the money supply directly and these in turn can affect unemployment, GDP growth, and the price level