Moral hazard occurs when
a. an employer closely monitors an employee.
b. two people consider a trade with each other and one person has relevant information about some aspect of the product's quality that the other person lacks.
c. an employee lacks an incentive to promote the best interests of the employer, and the employer cannot observe the actions of the employee.
d. an employee closely monitors the actions of her employer.
c
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Over twenty years ago the city of Washington D.C. was facing a budgetary shortfall. In a plan to increase tax revenue the mayor and city council agreed to raise the excise tax on gasoline
Typically for goods like gasoline which are price inelastic this should have led to an increase in tax revenue. However, just the opposite happened – tax revenue plummeted! What could explain this seemingly paradoxical result?
A firm can sell as much as it wants at a constant price. Demand is thus:
A. perfectly inelastic. B. perfectly elastic. C. relatively inelastic. D. relatively elastic.
The currency depreciations and the recessions during the Asian crisis did lead to improvement in the Asian countries' current account balances, largely through
A. decreases in imports. B. decreases in capital outflows. C. increases in the rate of inflation in these countries. D. increases in exports.
One of the elements of monopolization is
A. having a significant pricing power due to an accident in the relevant market. B. the possession of monopoly power in the relevant market. C. having a superior product or having a superior business acumen.. D. when only one firm exists in an industry.