The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could
a. allow individual shepherds to choose their own flock sizes.
b. internalize the externality by subsidizing the production of sheep's wool.
c. auction off a limited number of sheep-grazing permits.
d. wait until the market corrects the problem.
c
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The opportunity cost of an activity is
A) the dollar cost to engage in the activity. B) the value of the resources needed to conduct the activity. C) the same for all who participate in the activity. D) what you sacrifice to engage in the activity.
The Franklin National Bank Crisis had its greatest impact on the market for
A) commercial paper. B) commodity futures. C) negotiable certificates of deposit. D) Eurodollars.
Which of the following policies could lead to a deadweight loss?
A) price ceilings. B) price floors. C) policies prohibiting human cloning. D) all of the above E) A and B only
Adverse selection in insurance requires that
a. potential customers face different levels risk b. potential customers facing more risk are no more interested in purchasing insurance c. people are not risk averse d. insurers can tell higher risk people from lower risk people