Which of the following leads to an underallocation of resources to a specific economic activity?
A. marginal costs
B. external costs
C. effluent benefits
D. external benefits
Answer: D
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The largest and fastest-growing category of federal government expenditures is
A) transfer payments. B) grants to state and local governments. C) interest on the national debt. D) national park spending.
An option allowing the holder to buy an asset in the future is a
A) put option. B) call option. C) swap. D) forward contract.
In the presence of asymmetric information, a contingent contract
A) achieves production efficiency. B) can lead to opportunistic behavior on the part of the agent. C) is impossible to write. D) will result in the principal earning all of the profit.
Which of the following is an example of money illusion?
A) An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 5 percent. B) An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 20 percent. C) An individual will neither increase nor decrease the number of hours she is willing to work when the nominal wage rises by 10 percent and the overall price level rises by 10 percent. D) none of the above