Which of the following is not an example of moral hazard?
A. Investment banks use 40-1 leverage, knowing that if the market collapses, the government will come to the rescue.
B. A backcountry skier takes an excessively dangerous run, knowing that local rescue crews will come to his aid if he gets in an accident.
C. Insurance companies stopped offering insurance policies in New Orleans after a major hurricane, knowing the government will offer subsidies to draw people back.
D. Domestic automobile companies fail to design high-quality fuel-efficient cars, hoping that the government will save them if oil prices skyrocket.
Answer: C
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When John earned $65,000 he purchased 10 DVDs a year. His income has just increased to $68,000 and he plans to purchase 15 DVDs this year. John's income elasticity of demand equals
A) 0. B) 0.11. C) 1.67. D) 8.87.
Efficiency is reached by allocating resources to those who have the greatest willingness to pay for them. This can be achieved in a market where a negative externality is present by:
A. taxing consumers. B. giving consumers a subsidy. C. place a quota at the efficient level. D. All of these will achieve efficiency.
According to the textbook application, the avoided GHG emissions associated with the Energy Star Program in 2010 were equivalent to
a. removing 33 million cars from America’s highways b. producing 3 million fewer automobiles in the United States c. scrapping 3.3 million cars from highways around the world d. eliminating 33.3 million heavy-duty trucks from America’s highways e. none of the above
Slope is calculated as the:
A. change in the vertical variable divided by the change in the horizontal variable. B. change in the horizontal variable divided by the change in the vertical variable. C. the vertical axis divided by the horizontal axis. D. change in the vertical variable.