The principal-agent problem is:
A. when stockholders are not acting in the best interest of managers.
B. due to managers not being able to monitor stockholder behavior.
C. a form of moral hazard.
D. a form of adverse selection.
Answer: C
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When demand is ________, a decrease in price ________ total revenue
A) elastic; decreases B) inelastic; decreases C) unit elastic; increases D) elastic; does not change
Free trade policies may lead to
A) a decrease in world output. B) price increases in world markets. C) some labor sectors experiencing some short-term job loss. D) none of the above.
In perfect competition, P = MC is the condition that
A. holds only in the long run. B. encourages firms to enter an industry. C. guarantees that firms will make an economic profit. D. ensures that firms produce the right things.
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline