Explain how the invisible hand delivers an efficient market outcome
What will be an ideal response?
The invisible hand concepts claims that people, acting in their own self-interest, send resources to be used at their highest value. As a result, resources are efficiently used to produce the output of goods and services that people most highly value. With this outcome, producer and consumer surplus are maximized.
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Answer the following statement(s) true (T) or false (F)
1. Odds are said to be fair if they reflect the true probabilities of the various states of the world. 2. Risk aversion leads individuals to underinvest from a social point of view. 3. To deal with the problem of adverse selection, insurance companies may limit the amount of insurance that can be purchased at the most favorable odds. 4. An insurance company faces an adverse selection problem when people start taking additional risks after they acquire insurance. 5. A nuclear disaster is an uninsurable risk because it would adversely affect a large number of people simultaneously.
In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to
A) 2.50. B) 1.63. C) 0.40. D) 0.62. E) 1.00.
The weights used in calculating the firm's weighted-average cost of capital are equal to the proportion of debt and equity ____
a. used to finance the project b. used to finance the projects undertaken last year c. in the industry average capital structure d. in the firm's target capital structure e. none of the above
Portfolio investment can generally travel across borders quickly because it usually involves:
A. the shipment of equipment from one place to another. B. transfers between two bank accounts. C. two governments agreeing on trade. D. the hiring or firing of foreign workers.