Specialized investments:
A. cause managers to shirk.
B. are equally valuable in any productive use.
C. result in relationship-specific exchange.
D. make spot exchange efficient.
Answer: C
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The duration of unemployment tends to rise when
A) business activity goes into a downturn. B) business activity starts back up after a long period of decline. C) people leave their jobs rather than lose their jobs. D) the number of entrants exceeds the number of reentrants.
Van, whose utility of wealth curve is shown in the above figure, owns a home that is valued at $100,000. There is a 10 percent chance that the house will be destroyed by hurricane. The value of insurance to Van is
A) $10,000. B) $15,000. C) $20,000. D) $30,000.
In the Keynesian model, a build-up of unwanted inventories leads to
A) rising interest rates. B) falling unemployment. C) falling output. D) falling money wages.
To an economist, a free rider is a person who
A) uses private goods without paying for them. B) benefits from consuming public goods without paying for them. C) consumes demerit goods. D) uses the public transportation system without paying for it.