Moral hazard occurs when contracts are written in such a way that
A) the interests of agent and principal converge.
B) the interests of agent and principal diverge.
C) agents will wish to maximize the principal's utility.
D) production and risk-bearing efficiency are achieved.
B
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Refer to Figure 19-3. If the Thai government pegs its currency to the dollar at a value above $.03/baht, we would say the currency is
A) undervalued. B) equilibrium valued. C) overvalued. D) parity valued.
A major computer software company maintains a technical support center in a rural area and is the only employer in this region
Suppose the firm develops a new software system for managing technical support calls, and the marginal product of labor increases. What happens to the equilibrium outcome in this labor market? A) Labor demand shifts rightward, equilibrium wage and employment levels decline B) Labor demand shifts rightward, equilibrium wage and employment levels increase C) Labor demand curve remains the same, equilibrium wage and employment levels increase D) Labor demand curve remains the same, equilibrium wage and employment do not change E) none of the above
If an economy is operating inside its production possibilities curve for tanks and bread:
a. scarcity does not exist
b. all resources are being used efficiently.
c. production of bread can only increase by sacrificing the production of tanks.
d. production of bread and tanks can both increase.
Suppose a hurricane hits Alabama, causing widespread damage to houses and businesses. The governor of Alabama places price ceilings on all building materials to keep the prices reasonable. Which of the following is the most likely result?
A. The supply of building materials to Alabama will increase. B. Shortages of building materials and a slower recovery from the storm. C. A faster recovery from the storm. D. More people will be able to purchase building materials.