Which of the following is false?
a. Product liability laws can make it unprofitable to sell shoddy merchandise, providing a substantial incentive to provide safe products independent of government regulations.
b. Asymmetric information exists when the available information is initially distributed in favor of one party to a transaction relative to another.
c. In adverse selection situations, it is rational for a seller with more information about a product to provide a truthful and complete disclosure and make that fact known to a potential buyer.
d. Moral hazard arises in part from the fact that it is costly for an insurer to monitor the behaviors of the insured party.
c
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The law of diminishing returns states that as
A) the size of a plant increases, the firm's fixed cost decreases. B) the size of a plant increases, the firm's fixed cost increases. C) a firm uses more of a variable input, given the quantity of fixed inputs, the marginal product of the variable input eventually diminishes. D) a firm uses more of a variable input, given the quantity of fixed inputs, the firm's average total cost will decrease eventually.
Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3 percent, or he can take out a loan for $25,000 and pay 5 percent interest. Doug should compare:
A. the implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings. B. the implicit cost of $750 to the explicit cost of $1,250 and choose to borrow the money. C. the explicit cost of $750 to the implicit cost of $1,250 and choose to use his savings. D. the explicit cost of $25,750 to the explicit cost of $26,250 and choose to borrow the money.
A one-day ticket to Sea World costs $37, but a two-day pass costs $42 . What is the average cost per day for a one-day pass? For a two-day pass? What is the marginal cost of a second day at Sea World? Why might Sea World charge such a price for a second day's entrance to the park?
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4Refer to Figure 2.4. The economy moves from Point E to Point B. This could be explained by
A. a change in society's preferences for hybrid cars versus motorcycles. B. an increase in economic growth. C. an increase in unemployment. D. a reduction in unemployment.