In a principal-agent problem, if the contract implies that the more risk-averse agent will bear less risk, we can say that this contract exhibits
A) efficiency in risk-bearing.
B) risk sharing is not optimal because the less risk-averse (or risk-neutral) agent should bear none of the risk.
C) risk sharing is not optimal because all risk should be transferred to the most risk-averse agent.
D) risk sharing is not optimal because risk-neutral agents should face no risk.
A
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Assuming that the median voter model accurately explains how public sector decision are made, resources will be allocated efficiently if _____
a. preferences are single-peaked and individuals prefer outcomes closer to their preferred outcome rather than outcomes farther away b. rational ignorance and cyclical majorities are not present c. resources were already allocated efficiently in the private sector d. the median voter's demand is the same fraction of total demand as his tax share is of total taxes
The export supply curve is the portion of the domestic supply curve below the no-trade equilibrium price
a. True b. False Indicate whether the statement is true or false
a. Product markets
a. Money markets b. Resource markets c. Stock markets d. Product markets
Suppose the government levies a per-unit tax on TVs, and this tax increases the price of TVs by $100. Model TVs as x1 and all other goods as a composite good x2. a. For a consumer with income I, write down an equation for the before-tax budget line. b. Write down the after-tax budget line equation. c. Suppose you know the bundle on the after-tax budget that is chosen by the consumer contains 3 TVs. How much in tax revenue is the government raising from this consumer? d. If the government replaced the tax on TVs with a lump sum tax that does not alter any prices but raises the same amount of revenue from the consumer, how would this change the consumer's budget line equation?
What will be an ideal response?