The fact that many companies employ supervisors to oversee the actions of workers is a way to treat:
A. the free-rider problem.
B. moral hazard.
C. the law of diminishing returns.
D. adverse selection.
Answer: B
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The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $100 a piece to produce, what is the efficient quantity of submarines?
A) 0 B) 1 C) 2 D) 3
The demands for labor and other input factors are called
A) derived demands, because the demand for these inputs depends on the demand for goods and services they are employed to produce. B) developed demands, because the demand for these inputs is developed from an analysis of the costs of advertising products. C) indirect demands, because the demand for these inputs is indirectly related to the costs of advertising products. D) reverse demands, because the demand for these inputs varies inversely with the demand for goods and services they are employed to produce.
If a potato farmer expands output, he finds that the increase in total revenue is less than the increase in total costs. This means that:
A. profit is being maximized. B. he should not have expanded output. C. he should produce even more output. D. the firm is wasting resources.
Refer to the above figure. A unit tax of $2 has been placed on the good. Which of the following statements is TRUE about the vertical distance between S1 and S2?
A. The distance is less than $2. B. The distance is $2. C. The distance is more than $2. D. The distance cannot be determined with the information given.