Kim owns a small business in Denver. She travels frequently, meeting with important customers, and attending conferences. Kim hired Matt to work in the Denver office as the day-to-day general manager of the business
a. This is a moral hazard problem since Matt may not work as hard as Kim would like when he is not monitored.
b. Kim choosing to hire Matt is an example of adverse selection since it is possible that Matt will not work as hard as Kim expects.
c. Kim will most likely pay Matt a lower salary than normal since Kim will not be there to monitor Matt's work effort, and since Matt will not likely work hard knowing Kim cannot monitor his effort.
d. Kim is the agent and Matt is the principal.
a
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People are forced to economize because of
A. competition. B. pressure to conform. C. scarcity. D. the absence of money.
The principle of comparative advantage helps explain trade between nations.
Answer the following statement true (T) or false (F)
As real GDP ________, aggregate planned expenditure ________
A) decreases; remains the same, because it is independent from real GDP B) increases; remains the same, because the increase in some components is precisely offset by the decrease in others C) increases; decreases D) decreases; increases E) increases; increases
California passed a law called “Proposition 2 ½” that limited property taxes to 2.5 percent of property value. Naturally this reduced taxes on many properties, and apartment landlords had more money at the end of the year at given rents. This windfall could be called an economic rent only if
A. we push the definition of economic rent too far. B. the supply of rental units can be expanded. C. the supply of rental units is fixed. D. competitors can build housing at costs that yield the return that was earned before the tax cut.