Monopolistic competition results in
A. Marginal cost pricing.
B. Production efficiency.
C. Allocative efficiency.
D. The wrong mix of output.
Answer: D
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Monopolistic competition tends to lead firms to have wasted capacity. Why?
Short-run decisions are:
A. constrained because some inputs are fixed and others are variable. B. constrained because all inputs are fixed. C. unconstrained because all inputs are variable. D. constrained because all inputs are variable.
Apply the definition of risk provided in the textbook to an individual's decision to purchase a car insurance policy. Suppose that the individual has two possibilities: no accident ($0 gain/loss) and accident (-$30,000 loss). If the probability of an accident is lower than the probability of an accident occurring (say the probability of an accident is 10%), then why do people buy car insurance? How is this related to the concept of value at risk and the time horizon of investment decisions?
What will be an ideal response?
The use of coinsurance clauses and deductibles is an attempt by insurance companies to deal with the problem of:
A. moral hazard. B. non-payment of premiums. C. adverse selection. D. insufficient government regulation.