Consumers know that some fraction, p, of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value nondefective cars at $8,000. If new cars sell for $6,000 and used cars sell for $2,000, then what is the fraction p?
A. 0.33
B. 0.5
C. 0.25
D. 0.67
Answer: A
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According to the AK growth model, taxes on corporate income and capital gains ________ the incentive for firms to accumulate capital and ________ the steady-state growth rate
A) increase; increase B) reduce; reduce C) increase; do not change D) reduce; do not change
Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that
a. Polish firms are faced with stricter government regulations than Romanian firms. b. total income is divided among fewer workers in Poland since it has a smaller labor force than Romania. c. Romania's climate allows for longer growing seasons and therefore Romania can produce large quantities of grain and other crops. d. productivity in Poland is higher than in Romania.
A teenager plays his radio loudly at the beach. What can we conclude?
A) He creates a negative externality if it unintentionally annoys or upsets others. B) He creates a positive externality if it unintentionally benefits others who enjoy the same music. C) He creates no externality, if others remain unaffected by the music. D) All of the above.
What is a factor market?
A) It is a market where financial instruments are traded. B) It is a market where resources used to produce final goods are traded. C) It is a market where stocks and bonds are traded. D) It is a market where producers buy consumption and capital goods.