Suppose there are two small island countries: Avarice, which is populated by people who are completely self-interested, and Altruism, which is populated by people who have adopted social norms of generosity and cooperation. Commitment problems will be:
A. largely avoided on both islands.
B. largely avoided in Altruism, but prevalent in Avarice.
C. largely avoided in Avarice, but prevalent in Altruism.
D. prevalent on both islands.
Answer: B
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Jane is a 22-year-old college graduate. She has just started working at a job that pays her $75,000 per year. Since you have had an economics course, Jane asks you for advice on where to invest the money she is saving for her retirement. What do you recommend?
The FDIC
A. insures most bank deposits for up to $250,000. B. eliminates the need for bank depositors to run to their bank when they hear bad news about the bank. C. has been credited with reducing the number of bank failures since 1933. D. All of these responses are correct.
Assume that the current price of a market basket of goods is $5,000 and the base year price of the same market basket is $4,000. The current price index is
A. 125. B. 400. C. 2500. D. 200.
Marginal cost begins to rise when
A) diminishing marginal product begins. B) diminishing marginal product ends. C) average total cost falls. D) fixed cost falls.