Which of the following measures the effect a price change of a good will have on the desire for another good?
a. equilibrium elasticity of demand
b. cross-price elasticity of demand
c. revenue elasticity of demand
d. income elasticity of demand
b. cross-price elasticity of demand
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The manager of a large luxury hotel chain is currently negotiating a four year contract with a linens supplier. The linens company will supply fresh laundered bedding and towels to the hotel over a four year period; however, the hotel chain can ends its contract with the linens company at the end of the first, second, or third years if the linens company does not supply quality linens. What can
the manager of the hotel chain do to avoid the end-game problem? A) Pay the linens company in full after the third year. B) Pay the linens company in full after the second year. C) Pay the linens company in full after the first year. D) Offer a bonus to the linens company if they provide quality linens all four years.
Which of the following does not illustrate opportunity cost?
a. If I study, I must give up going to the football game. b. If I buy a computer, I must do without a 35" television. c. If I spend more on clothes, I must spend less on food. d. All of these illustrate opportunity cost.
Starting from an initial long-run equilibrium, under the rational expectations hypothesis, an anticipated shift to a more expansionary policy will increase
a. prices but not real output in the short run. b. real output but not prices in the short run. c. real output in the long run but not in the short run. d. real output in both the long run and the short run.
Bill gets medical insurance and then exercises less. Lilly has health concerns and so applies for medical insurance. Identify each of these as moral hazard or adverse selection