Adverse selection in insurance requires that
a. all people face the same risk
b. potential customers facing more risk are no more interested in purchasing insurance
c. people are risk averse
d. insurers can tell higher risk people from lower risk people
c
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If Table 12.2 represents all the investments available to the economy, the nominal interest rate is 4.5 percent and there is no inflation, what will be the level of investment in the economy?
A) $200 B) $500 C) $600 D) $800
Suppose the market demand curve is as depicted in the graph, and all firms have constant
1
1
24
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marginal costs of 20. Assume that consumer tastes in x are quasilinear. 
a. If a single monopolist who does not price discriminate serves this market, what is the value of consumer surplus and monopoly profit?
b. Suppose the government imposes a price ceiling of 40 on the monopolist from part (a). How does this change the value of consumer surplus and monopoly profit? c. Suppose instead that this market has two Cournot competitors. Illustrate their best-response functions (labeling intercepts and slopes) as well as the Nash equilibrium. What is the value of consumer surplus and profit in the market now? d. If the same price ceiling of 40 is imposed on the Cournot oligopoly, how will the best response functions change? (Assume that, if there is a good that is produced but does not get bought, it is equally likely that firm 1 gets stuck with the good as it is that firm 2 gets stuck with it, and it costs at least a penny to dispose of a good you are stuck with.) Is there more than one possible Nash equilibrium? e. Will overall surplus increase? f. Does your answer to (e) change if the price ceiling is imposed on Bertrand price competitors?g. True or False: Whenever price ceilings impact the price at which goods are traded, they disturb the price signal and therefore result in deadweight losses. What will be an ideal response?
If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant
Indicate whether the statement is true or false
The official poverty rate of elderly families
a. has been virtually unchanged for the last four decades. b. increased as the elderly became a larger proportion of the U.S. population during the 1970s. c. rose prior to the War on Poverty programs of the late 1960s, but it has declined steadily since. d. has declined during the last four decades.