Regarding the purchasing of INSURANCE in particular, the most important difference(s) between "adverse selection" and "moral hazard" in general is/are that
A. adverse selection deals with "hidden information," whereas moral hazard deals with "hidden actions."
B. usually the insurer worries more about adverse selection BEFORE the insurance is purchased, whereas it worries more about moral hazard AFTER the insurance is purchased.
C. Both of the above statements are true.
D. None of the above statements are true.
Answer: Both of the above statements are true.
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The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
In the figure above, with international trade the United States ________ million T-shirts per year
A) imports 20 B) exports 20 C) imports 40 D) imports 60 E) exports 40 The figure above shows the U.S. market for airplanes, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of an airplane is $150 million.
Giving presents on Christmas does NOT generate a deadweight loss if
A) all gift are money. B) everybody gets exactly want she wants. C) nobody can be made better off by returning the gift and purchasing a different one. D) All of the above.
To enhance their prestige, some country clubs like to point to the fact that they have a waiting list for new members
Even at clubs with high initiation fees, it is common that prospective members have to wait three or more years before there is room for them on the membership rolls. How do these country clubs set the price of membership to ensure that they have a waiting list? A) Set the membership price above the market clearing price. B) Set the membership price below the market clearing price. C) Set the price so that the quantity supplied of memberships exceeds the quantity demanded. D) Set the price at a level that will generate a surplus of memberships.