How do car dealers help reduce adverse selection?
What will be an ideal response?
To maintain their reputations with buyers, dealers are less willing to take advantage of private information about the quality of the used cars that they are selling than are individual sellers.
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The term self-interest, as viewed by economists, means that:
a. consumers never pay more for a good simply because it carries a certain designer label. b. only economists are capable of making choices according to rational self-interest. c. people never act in their self-interest until they have perfect information. d. consumers always seek the least expensive option when making a purchase, regardless of individual preferences. e. people make choices that, given the information available, gives them the greatest amount of satisfaction.
Although Denmark currently pegs its krona to the euro successfully, it has not joined the currency union. All of the following are reasons, EXCEPT:
A) with a peg, the Danish monetary authority has the option to exercise control over the exchange rate in the future if needed. B) Denmark has an additional option to abandon its peg to the euro if required to maintain stability. C) Denmark has the option to conduct monetary policy if it chooses. D) if Denmark gave up its krona and adopted the euro, it could always easily go back to the krona if needed to preserve monetary autonomy.
Crowding out will be greater
A) the less sensitive consumption spending is to changes in the interest rate. B) the further equilibrium GDP is below potential GDP. C) the more sensitive investment spending is to changes in the interest rate. D) if the economy is in recession, rather than at full employment.
Which of the following is an example of a normative statement?
A) A higher price for a good causes people to want to buy less of that good. B) A lower price for a good causes people to want to buy more of that good. C) To make the good available to more people, a lower price should be set. D) If you consume this good, you will be better off.