Which of the following statements is false?
A. Asymmetric information can exist both before and after a transaction.
B. Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party.
C. Adverse selection has the potential to eliminate some markets.
D. none of the above
Answer: D
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An expansionary monetary policy that successfully counteracts a recession has the side effect of
A) lower investment spending than if no action had been taken. B) a larger government deficit than if no action had been taken. C) a higher price level than if no action had been taken. D) lower output than if no action had been taken.
Suppose that capital and labor must be kept in a fixed proportion to produce a particular good. For example, digging a trench requires one worker who has one shovel. What does this imply about returns to scale?
A) There are constant returns to scale. B) There are increasing returns to scale. C) There are decreasing returns to scale. D) Nothing.
One example of Ricardian rent is:
a. rent paid to landlords under price controls. b. the difference between the price of a highly demanded unique piece of artwork and the opportunity cost of maintaining it. c. the amount paid to a seller above the equilibrium price of tourist class tickets in order to receive higher quality seats in first class. d. the price rise of wool from a disease among sheep.
Suppose Tyler values a basketball at $20 . Jacqui values a basketball at $16 . The pre-tax price of a basketball $15 . The government imposes a tax of $2 on each basketball, and the price rises to $17 . The deadweight loss from the tax is
a. $1. b. $2. c. $3. d. $6.