Consider John, who purchases an insurance policy on a racquetball racket that he has acquired. He then proceeds to hit his racket against the wall every time he losses a point. This is an example of
A. an adverse selection problem.
B. co-insurance.
C. a moral hazard problem.
D. signaling.
Answer: C
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Bonnie can produce either 10 hats or 20 scarves in a month. Phil can produce either 10 hats or 5 scarves in a month. Therefore:
A) Phil has a comparative advantage in hats, Bonnie in scarves. B) Bonnie has a comparative advantage in hats, Phil in scarves. C) Phil has a comparative advantage in both hats and scarves. D) Bonnie has a comparative advantage in both hats and scarves. E) Neither of them has a comparative advantage in hats.
If a goal of a nation's residents is to increase marginal productivity, they should increase
A) expenditures on education. B) the inheritance tax. C) exports. D) the marginal propensity to consume.
The GDP deflator is
What will be an ideal response?
The gold standard
A. worked well until World War II. B. will not work well when the world's gold supply increases as fast as the world's need for money. C. fell apart as the Great Depression spread, as nation after nation devalued its currency. D. makes monetary policy more effective.