The difference between adverse selection and moral hazard is that
A) moral hazard happens at the time parties enter into a transaction; adverse selection occurs after the transaction takes place.
B) adverse selection happens at the time parties enter into a transaction; moral hazard occurs after the transaction takes place.
C) moral hazard is the motive that is behind one party entering into a transaction with another party. Adverse selection refers to the other party being harmed by the transaction.
D) moral hazard refers to the likelihood that a transaction will lead one party to be better off at the expense of the other party to the transaction. Adverse selection refers to the consequences of the transaction after it has occurred.
Answer: B
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The theory that regulation helps producers to maximize profit is the
A) social interest theory. B) consumer surplus theory. C) antitrust theory. D) capture theory. E) oligopoly theory of regulatory bodies.
The presence of an incentive system that encourages growth
A) guarantees that growth will occur. B) creates the right conditions for growth to occur. C) cannot exist in poor countries. D) existed even in hunter-gatherer societies. E) means that the government must be a democracy.
If deviations from trend in a macroeconomic variable are positively correlated with deviations from trend in real GDP, that variable is said to be
A) useful in predicting future movements in real GDP. B) procyclical. C) countercyclical. D) acyclical.
Which statement most accurately describes the distribution of income among US families?
a. In 2005, as in most of American history, poor people work on average many more hours than do high-income people. b. The median real family income has remained about the same since 1970. c. One of the most significant determinants of income inequality in the US has been the increase in demand for highly trained labor. d. Earnings of married-couple families have grown more slowly than earnings of both male and female households with no spouse.