Suppose in the market for used cars, buyers would be willing to pay $9,000 for a car in good condition, while buyers would have to incur a cost of $3,500 to repair a car in poor condition. Assume a risk-averse buyer is aware that some of the cars are lemons, but is uninformed about the probability of a car being in good condition or otherwise. What price would this buyer, seeking only to minimize
risk, be willing to pay for a car?
a. $3,925
b. $5,500
c. $7,775
d. $5,850
B
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Adam Smith coined the term "invisible hand" to describe the process by which the actions of independent, self-interested buyers and sellers will:
A. always lead to the most efficient allocation of resources. B. often lead to increasing inequality. C. always lead an economy to ruin. D. often lead to the most efficient allocation of resources.
If a policy is carried out by a rule, then we have an example of
A) active policy making. B) discretionary policy making. C) nondiscretionary policy making. D) natural policy making.
Which of the following statements is false?
A) In some instances, simple majority voting leads to a project being undertaken even though the total costs of the project exceed the total benefits. B) Simple majority voting fails to take into account the intensity of individuals' preferences. C) Public choice economists often explain low voter turnouts in terms of the individual costs and benefits of voting. D) If an individual will only vote if he or she feels that his or her vote will make a difference in the election, it is likely that he or she will vote.
Related to the Economics in Practice on p. 716: By 2001, the majority of the fishing fleet in the Indian state of Kerala had mobile phones. As a result of the introduction of mobile phone service to this fishing industry, ________ increased and ________ decreased.
A. consumer prices; productivity B. competition; profits C. profits; consumer prices D. consumer prices; competition