"When a third party (for example, an insurance company or the government) pays all or most of the cost of a good or service, the incentive of consumers to shop for the best value per dollar spent and of producers to offer the item at an economical price is substantially reduced." This statement is
a. essentially true.
b. false; consumers will still have a strong incentive to search for the most economical price even if someone else is paying the bill.
c. false; producers will still have a strong incentive to keep prices low even if consumers are non-responsive to price differences among suppliers.
d. false; the party paying for the good will not influence the incentive of either consumers or producers to economize.
A
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Its Consumer Advisory Committee conducts open market operations of the Fed
Indicate whether the statement is true or false
Based on the graph for saving incentives, when a new tax law makes the supply shift from S1 to S2, the real interest rate would ______.
a. remain at r1
b. remain at r2
c. rise from r2 to r1
d. drop from r1 to r2
Economists consider an economy to be at "full employment" when:
A. the unemployment rate equals the natural rate of unemployment. B. there is only a small amount of cyclical unemployment. C. there is no frictional unemployment. D. there is no structural unemployment.
Bank A had a reputation for asking few questions when it provided loans. Two years later, the majority of the loans were not repaid. This is because the bank had failed to address the
A. free-rider problem. B. moral hazard problem. C. contrary selection problem. D. adverse selection problem.