Bill sells Mary a worthless coin that Bill deviously told Mary "belonged to an ancient Persian king and is of enormous value to coin collectors." Economists would call this an
A. efficient exchange, as any type of voluntary exchange promotes efficiency.
B. inefficient exchange because there were externalities involved.
C. inefficient exchange, as at least one party used false market information.
D. efficient exchange, assuming Bill was not intentionally trying to trick Mary.
Answer: C
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Amy received her wage based on her working hours in the grocery store. The work contract she signed is an example of a
A) fixed-fee contract. B) hire contract. C) contingent contract. D) sharing contract.
A price ceiling set below a market equilibrium price causes
A) a shortage. B) a surplus. C) producers to receive higher prices. D) consumers to pay higher prices.
If it costs Con Ed approximately $20 per additional ton of air pollution abated, but it costs PG&E only $10 per additional ton of air pollution abated and a marketable pollution permit trades for $14 per ton,
A. PG&E could gain by selling and Con Ed could gain by buying. B. both PG&E and Con Ed could gain by buying. C. both PG&E and Con Ed could gain by selling. D. PG&E could gain by buying and Con Ed could gain by selling.
For third-party certification to overcome the problem of ________, consumers must believe that it is ________.
A) adverse selection; unbiased B) adverse selection; biased C) moral hazard; unbiased D) moral hazard; biased