The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as:
a. the lemon problem.
b. moral hazard
c. external costs.
d. None of the above.
a
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An engineer has informed the city manager that the marginal cost of an additional car crossing the city bridge is zero? If you were required to draw this cost function on a graph what would it look like? What is the slope of this graph?
What will be an ideal response?
The argument that society should be in favor of changes that benefit some people without making others worse off is known as
A) a positive externality. B) the Coase Theorem. C) the cost-benefit principle. D) the Pareto principle.
You put money into an account that earns a 5 percent nominal interest rate. The inflation rate is 2 percent, and your marginal tax rate is 20 percent. What is your after-tax real rate of interest?
a. 3.6 percent. b. 2.4 percent. c. 2.0 percent. d. 4.4 percent.
Which of the following actions by Alonzo would represent moral hazard?
a. cutting back on his sugar and fat intake to reduce his cholesterol numbers b. taking riskier jumps on his bike since he has insurance to cover injuries c. continuing to do what he has always done now that he has health insurance d. accepting work at a dangerous job even though he is uninsured