Suppose Joe has a reliable two-year old Honda Civic that's in excellent condition and that he would be willing to sell for $13,000. Lauren, who is risk-neutral, is considering whether to buy Joe's car. She's willing to pay $14,000 for a two-year Honda Civic that is reliable and only $10,000 for one that's not reliable. Lauren cannot tell whether Joe's car is reliable, but she believes that only 20 percent of two-year old Hondas for sale in the market are reliable and that the other 80 percent are not reliable. Will Lauren buy Joe's car?
A. Yes, because Lauren will be willing to pay Joe more than $13,000.
B. No, because Lauren will not be willing to pay Joe $13,000.
C. Yes, because Lauren is willing to pay $14,000 for a car that's reliable.
D. Maybe, because Lauren might be willing to pay as much as $14,000.
Answer: B
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Commercial banks and thrift institutions The Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation The Open Market Committee and the Board of Governors District banks of the Federal Reserve System
One of the government's responses to the Financial Crisis of 2007-2009 was Dodd-Frank, a law that
A. authorized trillions of dollars in borrowing for the federal government. B. ignored the insurance industry. C. made special provisions for dealing with very large banks in times of crisis. D. eliminated the risk of another financial crisis in the future.
Refer to the diagram. A surplus of 160 units would be encountered if the price was:
A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $0.50.
If a city, like Denver, that is quite far from the nearest other urban area were to add a casino, the "local substitution" argument would suggest that there would be
A. a significant economic downside. B. a moderate economic upside. C. a moderate economic downside. D. a significant economic upside.