Does the presence of asymmetric information necessarily imply that governments should intervene in a market?
What will be an ideal response?
One of the most important reasons for government intervention is market failure. Asymmetric information in a market affects the functioning of the invisible hand and so is an example of market failure. Nonetheless, asymmetric information might not necessarily require government intervention. First, in some cases there are market solutions that can address the problem; efficiency wages, warranties, and third-party certification are examples of market solutions to asymmetric information problems. Second, it might be difficult for the government to gain enough market knowledge to significantly improve market outcomes. But, even if government intervention is not warranted to address the asymmetric information problems in markets on efficiency grounds, it may be justified to ensure a more equitable distribution of income and resources in the society.
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In the figure above, curve A is the ________ curve
A) average fixed cost B) average variable cost C) average total cost D) marginal cost
All of the following result from price floors in agriculture EXCEPT
A) surpluses of agricultural products that have price floors. B) higher prices to consumers for agricultural products that have price floors. C) lower prices to consumers for agricultural products that have price floors. D) governmental bureaucracy.
If FICA takes the same percentage rate of everyone’s pay, how can it take a higher proportion of the income of lower earners?
a. Lower earners have to pay the full amount, whereas higher earners’ employers pay half. b. The income from which FICA is taken is capped, so higher earners are not taxed on earnings above that amount. c. Lower earners are required to pay FICA during the year, and again as part of income taxes at the end of the year. d. FICA is only taken from hourly wages, so salaried workers, who usually earn higher incomes, do not have to pay it.
If the government increases the amount of unemployment insurance that unemployed workers can collect, the amount of frictional unemployment would be expected to:
A. fall. B. remain constant. C. rise. D. first rise and then fall.