Which of the following are potential problems faced by a firm that wants to provide warranties for its lawnmowers? (Select all that apply.)
a. A moral hazard problem might arise, in that homeowners may be less careful with the mower, since they can always return it if it breaks.
b. The warranty may select for homeowners that don't have a lot of mowing to do, or have smooth lawns, because they won't have to pay as much for a warranty.
c. The warranty will increase demand by assuring customers of the product's quality.
d. The warranty will reduce demand because only makers of low-quality goods would need to reassure consumers in this way.
a
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In the figure above, when disposable income equals $20 trillion,
A) consumption expenditure is less than disposable income but it is not possible to determine if consumers are saving or dissaving. B) consumption expenditure is greater than disposable income, so consumers are saving. C) consumption expenditure is greater than disposable income, so consumers are dissaving. D) consumption expenditure is less than disposable income, so consumers are dissaving. E) consumption expenditure is less than disposable income, so consumers are saving.
The minimum wage is an example of
A) a subsidy for low-skilled workers. B) a price floor. C) a black market. D) a price ceiling.
The above figure shows the market for crude oil. If a consumer group convinces the government to set a maximum price of $2 per barrel, then
A) 300 barrels of crude oil will be sold at $2. B) zero barrels of crude oil will be sold. C) zero barrels of crude oil will be demanded. D) None of the above.
According to the U.S. Supreme Court's 1920 ruling on U.S. Steel,
a. all monopolies are illegal b. all oligopolies violate the Sherman Antitrust Act c. large firms cannot be found to be in violation of the Sherman Antitrust Act d. "mere size is no offense" e. possession of market power is sufficient for a firm to be found in violation of the Sherman Antitrust Act