What is public choice?
What will be an ideal response?
The study of rational choice to model the decision makers in the public sector.
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The principal-agent problem is a problem
A) of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. B) that exists when a person (principal) has more information about the task than the agent he hires to perform the task. C) caused by agents pursuing their own interests rather than the interests of the principals who hired them. D) caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way.
Wal-Mart created a competitive advantage with its inventory system to reduce the ratio of cost of goods sold to sales, expecting:
a. to enjoy huge economic profits forever. b. that its rivals will never imitate their strategy and it will continue to enjoy positive economic profits. c. that its rivals will immediately do the same thing and it will end up earning zero profits. d. to enjoy economic profits for a few years before its rivals caught up. e. that it will at least be able to cover its fixed costs.
A multiple regression model suffers from functional form misspecification when it does not properly account for the relationship between the dependent and the observed explanatoryvariables.
Answer the following statement true (T) or false (F)
Refer to Figure 6.3. If the market is in equilibrium, the producer surplus is:
A. area ABC. B. area BCD. C. zero. D. area ACD.