Every society faces trade-offs. Explain the concept of trade-offs
What will be an ideal response?
Trade-offs refer to the idea that, because of scarcity, producing more of one good or service means producing less of another good or service.
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Trade restrictions result in all of the following except one. Which is the exception?
a. higher prices b. fewer choices c. improved quality d. misallocation of resources e. reduced competition
Which of the following is an example of an adverse supply shock?
A) a nationwide drought lasting for many months B) an outbreak of war among several of the Middle Eastern oil-producing countries C) an influenza virus that affects 50 percent of the labor force over a two month period D) a, b, and c E) a and c
Refer to the scenario above. Which of the following is likely to happen if Elly is known to be vengeful?
A) Neither of them will make money. B) Only Elly will make money. C) Only Elly's employee will make money. D) Both Elly and her employee will earn money.
The Securities and Exchange Commission of the U.S. government requires that mutual fund companies publish a long and detailed prospectus which covers an array of areas including the cost of owning the fund, the types of stocks the fund invests in,
the management fee, administrative fees and an assessment of the type of risk that holding the fund represents. This is clearly designed with the intent of mitigating the imperfect information problem. However, can you think of any reason why the value of these documents is likely to be quite marginal?