When the government redistributes income to achieve greater equality, it
a. distorts incentives.
b. improves efficiency.
c. focuses on middle income brackets.
d. relies on foreign aid to help balance the budget.
a
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Both signaling and screening:
A. reduce efficiency in the market. B. are effective ways to increase information available to both parties. C. benefit the sellers but harm the buyers. D. benefit the buyers but harm the sellers.
As firms exit a competitive price-searcher market, profits of remaining firms
a. decline and product diversity in the market decreases. b. decline and product diversity in the market increases. c. rise and product diversity in the market decreases. d. rise and product diversity in the market increases.
Consumers know that some fraction, p, of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value nondefective cars at $8,000. If new cars sell for $6,000 and used cars sell for $2,000, then what is the fraction p?
A. 0.33 B. 0.5 C. 0.25 D. 0.67
According to the invisible hand theorem, as stated in the text,
A. even non-competitive markets are able to achieve Pareto efficient outcomes. B. an equilibrium produced by competitive markets will exhaust all gains from exchange. C. non-market forces can prevent the markets from guiding consumers to the contract curve. D. government interaction is sometimes needed as an invisible hand to lead the economy toward efficiency.