When government mandates participation in a program to solve an information asymmetry problem, it is trying to prevent:
A. moral hazard.
B. adverse selection.
C. building a reputation.
D. illegal screening.
B. adverse selection.
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If a natural monopoly is regulated using the marginal cost pricing rule, how does the regulation affect prices, outputs, profits, and the distribution of surpluses? What are the pros and cons to this method of regulation?
What will be an ideal response?
One of the effects of patents is to
a. reduce incentives for innovation. b. give firms incentives to worry less about minimizing production costs. c. temporarily provide the patent owner with monopoly power. d. reduce the degree of monopoly power in the short run.
Welfare economics is concerned with individual desirability of alternative economic states.
A. True B. False C. Uncertain
In long-run equilibrium under pure competition, all firms will produce at minimum:
A. Average total cost B. Marginal cost C. Total cost D. Average variable cost