When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night, it is an example of
a. both moral hazard and adverse selection.
b. neither moral hazard nor adverse selection.
c. moral hazard, but not adverse selection.
d. adverse selection, but not moral hazard.
c
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Two university graduates, Bill and Steve, worked for an advertising agency at an annual salary of $40,000 each for 3 years after they graduated. Then, they decided to quit their jobs and start a partnership that designs and builds Web sites
They rented an office for $12,000 a year and bought capital for $30,000. To pay for the equipment, Bill and Steve borrowed money from a bank at an annual interest rate of 6 percent. During their first year of operation, the partners' total revenue was $100,000. The market value of their capital at the end of the year was $20,000. If Bill and Steve do not design Web pages, their best alternatives are to return to their previous job. a) What is the firm's economic depreciation? b) What are the partnership's costs? c) What is the firm's economic profit in the first year of operation?
If the monopoly illustrated in the figure above could engage in perfect price discrimination, then it would sell
A) 30 tickets. B) 50 tickets. C) 60 tickets. D) 100 tickets.
Central bank credibility may be established by ________
A) the appointment of individuals to the Fed with a strong aversion to inflation B) quicker responses to negative aggregate supply shocks C) greater coordination between monetary and fiscal policy D) the appointment of central bankers who are hawkish on defense
In the United States, incomes have historically grown
a. about 0.5 percent per year. b. about 2 percent per year. c. about 4 percent per year. d. about 6 percent per year.