Suppose you notice that the market for used bikes is dominated by lemons (low-quality bikes). In such a situation, if you are a buyer of used bikes, you are faced with:
A. a positive externality.
B. perfect information.
C. an adverse selection problem.
D. symmetric information.
Answer: C
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Refer to the figure above. If the government fixes a minimum wage rate at $15, the unemployment in the market will be:
A) 20 units of labor B) 0 units of labor C) 10 units of labor D) 30 units of labor
The goal of contractionary monetary policy is to:
A. reduce interest rates to stimulate the economy. B. increase interest rates to stimulate the economy. C. reduce interest rates to slow down the economy. D. increase interest rates to slow down the economy.
When a competitive firm produces output up to the point at which the price is equal to marginal cost, it also hires labor up to the point at which the wage is equal to the
a. marginal cost of labor. b. marginal profit of labor. c. marginal product of labor. d. value of the marginal product of labor.
The equation for the tax multiplier is
a. 1 b. MPS/(1 - MPC) c. (1 - MPC)/MPC d. (1 - MPC)/MPC e. MPC/(1 - MPC)