Adverse selection in insurance requires that
a. all people face the same risk
b. potential customers facing more risk are more interested in purchasing insurance
c. people are not risk averse
d. insurers can tell higher risk people from lower risk people
b
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If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves, it can make new loans of:
a. $2,000 b. $18,000. c. $20,000 d. $200,000.
When the Fed conducts expansionary monetary policy, lower short-term interest rates will tend to stimulate the economy. How will the change in the velocity of money affect this result?
a. Velocity will decline, enhancing the stimulus effect. b. Velocity will increase, somewhat dampening the stimulus effect. c. Velocity will increase, enhancing the stimulus effect. d. Velocity will decline, somewhat dampening the stimulus effect.
Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the average total cost of using 81 units of capital and 9 units of labor is:
A. $80. B. $75. C. $5. D. There is insufficient information to determine the average total costs.
Short run economic costs must be lower than long run economic costs because long run economic costs include the cost of inputs that are fixed in the short run (and thus are not part of short run cost).
Answer the following statement true (T) or false (F)