Explain why new classical economists favor a laissez faire policy approach.
What will be an ideal response?
New classical economists believe that people make rational choices based on all available information. If discretionary policy is anticipated, people will respond to policy changes in such a way that policy is ineffective. Therefore, new classical economists favor leaving the economy alone rather than implementing policies that are unlikely to work.
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Moral hazard is caused by
a. Hidden actions b. Hidden information c. Both of the above d. None of the above
Public goods can be
A. provided privately. B. provided publicly. C. subject to free rider problems. D. all of these answer options are correct.
Scenario: Glocus Inc. a manufacturer of health and beauty aids, is expanding its presence in several countries around the world. Glocus' president is surprised at some of the responses the company is receiving from other countries. France gave Globus Inc. permission to export its product as long as the company obtained a special license first. Excelsior has been waiting six months for the license and is wondering if it will ever arrive. Globus Inc. is experiencing a(n) ________.
a. Administrative delay b. local content requirement c. embargo d. currency control
Entrepreneurs care about:
A. only themselves. B. profits and solving problems. C. profits and prices. D. only profits.