The most efficient method of allocating scarce resources is through:
a. well-placed price controls on high-cost goods and services.
b. utilization controls to ensure that demand does not exceed supply.
c. competitive markets that allow supply and demand to interact freely to establish equilibrium prices.
d. strictly followed budgets that keep spending under control.
e. favorable tax treatment on those items that policy makers want to control.
c. competitive markets that allow supply and demand to interact freely to establish equilibrium prices.
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When lenders are unable to get good information about the worthiness of a project the lender has the problem of
A) adverse selection. B) moral selection. C) moral hazard. D) adverse hazard.
Suppose a health insurance company notes that almost all of its customers are at a high risk of illness or injury. This is an example of:
A. public information. B. perfect information. C. a thick market. D. an adverse selection problem.
Suppose there are 100 identical firms in the rag industry, and each firm is willing to supply 10 rags at any price. The market supply curve will be a
A) vertical line where Q = 10. B) vertical line where Q = 100. C) vertical line where Q = 1000. D) horizontal line where Q = 1000.
In a competitive market, profit can be considered a reward to businesses that
a. produce a good that consumers value more highly than its component resources. b. reduce the value of resources used as inputs in production. c. prohibit rival firms from entering the market and competing. d. control costs, rather than following the wishes of consumers when deciding what products to produce.