The welfare analysis of advertising is controversial because evaluation of the effect of advertising on aggregate surplus depends on:
A. the marginal cost of the advertising.
B. whether the inframarginal consumer is influenced by the advertising.
C. whether the advertising is tied to a quality increase.
D. the reason it succeeds in increasing demand.
D. the reason it succeeds in increasing demand.
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Microsoft has been accused of violating an antitrust law pertaining to bundling.
Answer the following statement true (T) or false (F)
Firms that pool deposits by customers to purchase stocks or bonds are known as:
A. mutual fund companies B. investment banks C. thrifts D. insurance companies
You value your economics textbook at $10. Someone else values it at $25, and that person is willing to pay you $20 for your textbook. Would selling your textbook to this person for $20 be Pareto efficient?
A. No, the person paid you $20 for the book so his net benefit was only $5, whereas your net benefit was $10. For this change to be Pareto efficient, each of you should have the same net benefit. B. Yes, because even though you gain from the trade and he loses, there is the potential for you to compensate him for his loss. C. No, because you did not receive the maximum amount the other person would have been willing to pay for the textbook. D. Yes, because both of you are better off as a result of the trade.
Moral hazard occurs when one side of an economic relationship:
A. takes costly actions that the other side of the relationship cannot observe. B. takes actions that is contrary to the religious beliefs of the other side of the economic relationship. C. takes actions that the other side of the relationship enjoys doing. D. takes actions that the other side of the relationship cannot force them to do.