Warranties in the used car market ________ the problem of private information thereby causing the price of good and bad used cars to ________
A) reduce; be the same
B) reduce; differ
C) magnify; be the same
D) magnify; differ
B
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During recessions, the value of collateral decreases and corporate profits decrease, so firms do not have cash to finance new investment projects. Therefore, credit rationing depends on the state of the economy. This situation is known as the
A) risk acceptance cost. B) lender's dilemma. C) default premium. D) financial accelerator.
The main reason that firms adjust their output when the price level changes is that
a. uncertainty causes a drop in output. b. taxes cause a supply-side reaction. c. their profit margins change. d. increased risks lead to a change in output. e. All of the above are correct.
Which of the following are not reasons household production still exists?
a. No skills or special resources are needed. b. Household production avoids taxes. c. Household production increases transaction costs. d. Technological advances increase household productivity.
Total consumer surplus is measured as the area:
A. beneath the market price and above the supply curve. B. above the demand curve. C. between the demand curve and the supply curve. D. beneath the demand curve and above the market price.