Health insurance companies face an asymmetric information problem because:
A. insurance companies have superior information concerning the risk of illness or injury of those insured.
B. buyers have superior information concerning their risk of illness or injury.
C. the insurance companies and buyers both have equal information concerning the risk of illness or injury of those insured.
D. the probability of becoming ill or injured is unrelated to the insured person's occupation.
Answer: B
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Refer to the figure above. If the monopolist faces a constant marginal cost of $2, at what price should it sell its output?
A) $2 B) $6 C) $10 D) $12
Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. Suppose Kate enters the market first and chooses her output before Alice. What is the difference in Kate's profit when she enters the market first compared to when Kate and Alice choose their outputs simultaneously?
A. When Kate enters the market first, her profit is $13,333.33 higher. B. When Kate enters the market first, her profit is $5,000 higher. C. When Kate enters the market first, her profit is $1,111.11 higher. D. When Kate enters the market first, her profit is $3,888.89 lower.
If government spending were to increase we expect that the aggregate demand curve will:
A. shift to the right. B. remain unchanged but the economy will move down along the curve to a higher quantity. C. remain unchanged but the economy will move down along the curve to a lower quantity. D. shift straight down.
If a local diner can sell 50 burgers per day at a price of $5 each, but must reduce the menu price to $4.95 to sell one more burger, what is the marginal revenue of the 51st burger?
A. $252.45. B. $2.45. C. -$0.05. D. $4.95.