What is the Coase theorem?
What will be an ideal response?
The Coase theorem says that, under certain conditions when externalities are present, private parties can arrive at the efficient solution without government involvement.
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What is a principal-agent problem and why does it create inefficiency? What are efficiency wages and how can they help correct principal-agent problems?
What will be an ideal response?
In the money market, a decrease in money demand will:
A) result in a rightward shift in the money demand curve increasing interest rates. B) result in a rightward shift in the money demand curve decreasing interest rates. C) result in a leftward shift in the money demand curve increasing interest rates. D) result in a leftward shift in the money demand curve decreasing interest rates.
If a good is normal, the income elasticity of demand must be
A. positive and greater than 1. B. negative. C. zero. D. merely positive (not necessarily greater than 1).
If a fiscal policy program requires new legislation to make it happen, it is
A. discretionary. B. contractionary. C. unconstitutional. D. non-discretionary.