Explain how product liability laws can reduce adverse selection
What will be an ideal response?
Product liability laws force producers to compensate consumers that purchase a defective product. This eliminates the producer's ability to profit from asymmetric information.
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Systematic overestimation or underestimation of inflation will
a. occur under rational expectations but not under adaptive expectations. b. occur under adaptive expectations but not under rational expectations. c. occur under both rational and adaptive expectations. d. not occur under either rational or adaptive expectations.
For a monopolist
A) marginal revenue is less than price. B) marginal revenue equals price. C) marginal revenue is greater than price. D) marginal revenue equals average revenue.
Which of the following could be evidence of a market failure?
A) Resources in an economy are not fully utilized. B) The market price of a product is above the average cost of production. C) There are only a handful of firms competing against each other in an industry. D) Market prices do not reflect true production costs.
Refer to the information provided in Figure 25.2 below to answer the question(s) that follow.
Figure 25.2Refer to Figure 25.2. Suppose that money demand is currently at Point B. A movement to Point D could be caused by
A. an increase in the price level, ceteris paribus. B. an increase in nominal income, ceteris paribus. C. a decrease in the price level, ceteris paribus. D. a decrease in the interest rate, ceteris paribus.