What is the difference between sunk costs and marginal costs?
Sunk costs are incurred by an individual when a past decision cannot be changed or corrected. Such costs cannot be avoided. Marginal costs however, can be avoided if choices or decisions are changed.
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How can managers of natural monopolies exaggerate their costs?
What will be an ideal response?
Pay-as-you-go social security
A) can never improve economic welfare for everyone. B) can improve welfare for everyone if the population growth rate is large enough. C) is always inefficient. D) is not used by any countries in the world.
Assume a country agrees to a free-trade act with another country. In the process, some individuals are displaced from their jobs, thus the free-trade act results in a negative externality
A) False. B) True. C) Only if those who were displaced are not compensated with another job or income transfer. D) Only if those who were displaced were compensated with another job or income transfer.
The possibility that a borrower might engage in riskier behavior after a loan is made is called
A) adverse selection. B) liability aversion. C) moral hazard. D) the risk of default.