The market for bagels contains two firms: BagelWorld (BW) and Bagels'R'Us (BRU). The owners of the two firms decide to fix the price of bagels. The table below shows how each firm's profit (in dollars) depends on whether they abide by the agreement or cheat on the agreement. 
Suppose the game above is repeated every day, and both firms adopt the following strategy: cooperate on the first day, then if the other firm cheats, cheat the next day, and if the other firm abides, abide the next day. This type of strategy is known as: ________.
A. the cartel solution
B. a tit-for-tat strategy
C. a prisoner's dilemma
D. the golden rule
Answer: B
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An indication that Insurance companies anticipate adverse selection is
a. they do not require a deductible b. they do not classify clients into different risk types according to their claim history c. they do not classify clients into different risk types according to pre-existing conditions d. they require a co-payment
Suppose the figure below shows Luke's demand curve for check-ups along with the supply curve for check-ups. 
What is the marginal cost of one extra check-up?
A. $100 B. $150 C. $200 D. $50
Which of the following statements is true about risk management in market systems versus command systems?
A. Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where in command systems government decision makers don't bear those costs. B. Neither system is better than the other in terms of risk management; both systems are equally susceptible to natural disasters and changes in consumer preferences. C. Command systems manage risk better because the government controls most economic activity and can therefore eliminate risk. D. Market systems face risk because of the possibility of profits and losses; command systems don't face risk because they are not profit driven.
Suppose that Rosa is considering migration to another country. To move, she will have to spend $5000 on transportation and $4000 in application and other processing fees. Rosa's stream of future earnings in her home country is $500,000. She expects to earn a stream of future earnings of $800,000 in another country. Based on this information, Rosa's explicit cost of migrating is:
A. $9,000 B. $500,000 C. $507,000 D. $5,000