A seller's verbal assurance that a used car is a plum (high-quality car):
A. is not effective at reducing the problems associated with asymmetric information.
B. is an effective way for sellers to prove that the good they are selling is of high quality.
C. is a more efficient way to prove high quality than a money-back guarantee because it does not cost the seller any money to make the assurance.
D. provides the same protection against adverse selection than does a repair guarantee.
Answer: A
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How does an increase in the real exchange rate affect exports and imports?
A) Exports increase; imports decrease. B) Exports decrease; imports increase. C) Exports increase; imports change ambiguously. D) Exports change ambiguously; imports decrease. E) Exports increase; imports are constant.
If the price level in the U.S. decreases, aggregate output demanded: a. decreases because U.S. products become cheaper relative to foreign products
b. decreases because U.S. products become more expensive relative to foreign products. c. increases because U.S. products become cheaper relative to foreign products. d. increases because U.S. products become more expensive relative to foreign products. e. decreases because household wealth and spending in the U.S. decrease.
Economic analysis suggests that patent laws that can often be used to limit the entry of potential competitors into an industry
a. redistribute income from consumers to business decision makers without affecting the allocation of resources. b. may be a source of business monopoly power, but they may also encourage innovation in the long run. c. encourage product development and the adoption of cost-reducing technologies in the short run but in the long run generally lead to business monopoly. d. help inventors at the expense of consumers in the long run.
Fiscal policy used to close a recessionary gap is known as _____
Fill in the blank(s) with the appropriate word(s).