In terms of insurance, which of the following statements is explained by adverse selection?
A. A person with riskier characteristics tends to be more likely to buy insurance.
B. Insurance companies charge risk-averse customers a higher premium, since they need more peace of mind.
C. A person who is more risk-averse tends to be more likely to buy insurance.
D. None of these statements is true.
Answer: A
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The foreign exchange rate is defined as the
A) equal to the amount of the current account deficit. B) equal to the amount of the capital account deficit. C) volume of the world currencies traded. D) rate or the speed with which the currencies of the worlds are traded. E) price at which one currency exchanges for another.
A minimum wage that is above the equilibrium wage rate
A) increases efficiency within the labor market. B) increases the quantity of labor demanded. C) creates a deadweight loss. D) has no effect on the labor market because it is set above the equilibrium wage rate. E) None of the above answers is correct.
If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm
a. will be earning positive economic profit at the profit-maximizing quantity. b. will have economic profit less than zero at the profit-maximizing quantity. c. will have zero economic profit at the profit-maximizing quantity. d. should increase the quantity of production to increase profit.
The balanced budget multiplier says that
A. An increase in government spending paid for by a tax increase of equal size has no effect on aggregate demand. B. An increase in government spending must be paid for by a tax cut of equal size. C. An increase in government spending paid for by a tax increase of equal size shifts aggregate demand leftward. D. An increase in government spending paid for by a tax increase of equal size shifts aggregate demand rightward.