Researchers demonstrate conclusively that drinking 4-6 ounces of ginger ale each day increases life expectancy by 3 years. What happens in the market for ginger ale?
A) The equilibrium price falls, and the equilibrium quantity rises.
B) The equilibrium price rises, and the equilibrium quantity falls.
C) The equilibrium price and quantity rise.
D) The equilibrium price and quantity fall.
Ans: C) The equilibrium price and quantity rise.
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If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of
A) adverse selection. B) moral hazard. C) asymmetric information. D) the principle-agent problem.
An important difference between tariffs and quotas is that tariffs
A) raise the price of the good. B) generate tax revenue for the government. C) stimulate international trade. D) help domestic producers. E) are paid by foreign producers.
When the Federal Reserve System wants to increase the money supply, which of the following actions would the Fed choose?
a. It purchases U.S. government securities. b. It increases the discount rate. c. It increases the required reserve ratio. d. It sells bonds on the open market.
If the reserve ratio is 25 percent, what level of excess reserves does a bank acquire when a customer deposits a $12,000 check drawn on another bank?
A. $3,000 B. $6,000 C. $9,000 D. $12,000