Moral hazard describes a scenario in which:
A. behaving morally produces a negative consequence.
B. people behave more risky or renege on agreements when they do not face the full consequences of their actions
C. people behave in a riskier fashion because they don’t understand the consequences of their actions.
D. when people behave morally they put themselves in a hazardous situation.
B. people behave more risky or renege on agreements when they do not face the full consequences of their actions
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Refer to Game Matrix II. In this game,
Game Matrix II
The following questions refer to the game matrix below. Player A can play the strategies "High" and "Low," and Player B can play the strategies "Odd" and "Even."
a. players A and B both have dominant strategies.
b. player A has a dominant strategy, but player B does not.
c. player B has a dominant strategy, but player A does not.
d. neither player has a dominant strategy.
How does a country maintain a fixed exchange rate?
A) By intervening in the foreign exchange markets and buying or selling currency as needed to achieve the desired exchange rate. B) By forbidding foreign exchange markets to trade currency at anything other than the official exchange rate. C) By setting domestic interest rates to achieve purchasing power parity as the desired exchange rate. D) By intervening in import and export markets to achieve the desired current account and exchange rate.
Which of the following is a lesson that can be learned from monetary policy during the Great Depression?
a. Monetary policy should be changed frequently in response to economic fluctuations. b. Prolonged periods of monetary contraction will retard economic growth. c. Low interest rates will direct an economy toward recovery. d. Monetary policy should focus on variables such as output and employment.
Mondo's Microbrewery is growing rapidly. As a result of achieving larger size, the firm realizes it needs to hire quite a few additional employees and upgrade its brewing and bottling equipment, which increases its average costs. The best explanation for these events is that Mondo's Microbrewery is experiencing ________ returns to scale.
A. constant B. increasing C. decreasing D. first decreasing and then increasing