What is mechanism design? Give at least two examples
What will be an ideal response?
It is a branch of economic theory that studies how contracts or institutions can be designed in such a way as to align the objectives of two parties in a transaction. A piece- rate compensation method, for example, createsincentives for a worker to work hard, just as his or her superior wants. A co-payment in the health care industry encouragesmore careful use of health care, just as the insurance company wants.
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Spencer and Brander's model highlights the existence of
A) aircraft industries. B) excess returns present in highly competitive markets. C) excess returns, or rents, available in non-competitive markets. D) the futility of government bureaucrats' attempts to build an airplane. E) natural advantages in foreign technology firms.
Momentum investing can be described as
A) consistent with the efficient markets hypothesis. B) similar to mean reversion. C) follow the picks of investors who have been successful in the past. D) the trend is your friend.
The demand for a factor of production depends on the:
a. supply of the factor. b. supply of other factors of production. c. demand for other factors of production. d. demand for the products that it helps to produce.
Which of the following statements is correct?
a. The demand for capital is derived from the demands for outputs. b. The demands for output are derived from the demand for capital. c. The demand for capital is derived from the demand for rent. d. The demand for rent is derived from the demand for capital.