If the existence of health insurance increases one's incentive to use the health care system more intensively, this is an illustration of:
A. the adverse selection problem.
B. the moral hazard problem.
C. the benefits-received principle.
D. the Coase theorem.
Answer: B
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Suppose that, last year, the price of peanuts fell and the quantity sold increased. Use supply and demand analysis to explain how these changes could have occurred
What will be an ideal response?
The government can help solve the information asymmetry problem by:
A. telling less-informed parties not to participate in the market. B. excluding those who do not have complete information from the market. C. making markets illegal where information asymmetry is significant. D. requiring the more informed party to reveal the missing information.
Monetarists think that the government:
a. should take an active role in the economy. b. should change the money supply growth rate regularly to achieve low inflation. c. should actively intervene in the economy, but only by decreasing the fiscal expenditure. d. should intervene in the economy as little as possible. e. should consciously set out to achieve full employment.
Which of the following would be most likely to have monopoly power?
a. a national florist b. an online bookstore c. a local restaurant d. a local electrical cooperative