Moral hazard typically occurs because
A) people are dishonest.
B) agreements sometimes create incentives that are costly to monitor.
C) workers possess diminishing marginal productivity.
D) workers possess adverse selection.
B
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A decrease in default risk on corporate bonds ________ the demand for these bonds, and ________ the demand for default-free bonds, everything else held constant
A) increases; lowers B) lowers; increases C) does not change; greatly increases D) moderately lowers; does not change
What is productive efficiency? Does it guarantee that markets are operating efficiently?
Which statement is true?
A. Usury laws enable banks to charge higher credit card interest than the price mechanism would allow. B. Usury laws prevent banks from charging higher credit card interest rates that the price mechanism would allow. C. Usury laws have never had any effect on how much interest is charged. D. None of the statements is true.
A firm is employing inputs such that the marginal product of labor is 25 and the marginal product of capital is 40. The price of labor is $5 and the price of capital is $8. If the firm wants to minimize costs, then it should:
A. Use more labor and less capital B. Use less labor and less capital C. Use less labor and more capital D. Make no change in resource use