The tendency for people to behave in a riskier way or to renege on contracts when they do not face the full consequences of their actions is called:
A. collective bargaining.
B. adverse selection.
C. moral hazard.
D. counter information.
Answer: C
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There are two can companies, American and National, which have entered into a collusive agreement. The payoff matrix of economic profits is above
If National is able to cheat on the agreement but American complies with the agreement, what amount of economic profit is made by National? A) $2,000 B) $3,000 C) $4,000 D) $6,000
The existence of positive externalities due to the impossibility of full appropriability
A) supports the conclusions of the Heckscher-Ohlin model. B) rejects the usefulness of government protectionism. C) supports the concept that the government should support only high-tech industries. D) provides support for government protectionism. E) supports arguments for free trade.
Which of the following would be best classified as a private good?
A) a missile defense system B) police force C) radio frequency D) clothing
The concept of utility maximization:
A. is solely used to measure an individual's satisfaction with his consumption choices. B. can be used broadly to think about choices made motivated by satisfaction, envy, status, or kindness. C. assumes each individual seeks to increase his own personal satisfaction regardless of others. D. None of these is true.