One way that insurance companies can reduce the moral hazard problem is to:
A. make insurance customers pay a deductible before the company pays on a claim.
B. engage in genetic testing to determine who is more likely to be high risk.
C. eliminate copayments on insurance claims.
D. insure only customers with good morals.
Answer: A
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In a closed economy, which of the following equations reflects investment? (Y = GDP, C = Consumption, G = Government purchases, T = Taxes, and TR = Transfers)
A) Y - T + TR B) Y - C - T C) C + G -T D) Y - C - G
The market price of the product produced by Jones Inc, is $6 per unit, which is higher than the average cost of $4 per unit at the profit maximizing output level. The average variable cost of production is $3.5 per unit. If demand for its product declines due to introduction of cheaper substitutes and the market price of the product falls to $3.8 per unit, which of the following statements will
be true? a. The firm will close down in the short run. b. The firm will continue production as long as the market price is above average variable cost. c. The firm will continue production as long as the market price exceeds fixed cost. d. The firm will minimize it losses by producing where average variable cost equals $3.8.
Which of the following are government franchises?
a. Regional phone companies. b. The United States Postal Service. c. Electric utilities. d. All of the above.
Efficiency occurs if the:
A. individually rational quantity of goods and services is being produced. B. market is in equilibrium. C. government does not interfere with market prices. D. socially optimal quantity of goods and services is being produced.