If fewer cigarettes are consumed with symmetric information than asymmetric information, it follows that
A. with asymmetric information the demand for cigarettes is lower than with symmetric information.
B. with symmetric information the demand for cigarettes is lower than with asymmetric information.
C. the demand for cigarettes is the same with or without asymmetric information.
D. there are more free riders with asymmetric information than symmetric information.
E. There is not enough information to answer the question.
Answer: B
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If a good is produced using inputs for which there are no substitutes, the good's
A) elasticity of supply is likely to be small. B) elasticity of supply is likely to be large. C) elasticity of demand will be small. D) elasticity of demand will be large.
Which of the following effects takes place as a result of automatic stabilization?
A) extra tax revenues are generated in a boom B) tax revenues remain constant during a recession C) leakages increase during a recession, helping to stimulate the economy D) Both A and C are correct.
If Big Dogs, a hot dog producer, purchases delivery trucks to deliver their hot dogs to local grocery stores, this is an example of ________.
A) outsourcing B) forward integration C) backward integration D) divestiture
The following are common errors students make when discussing supply and demand. What is the mistake in each?
a. At equilibrium, demand equals supply. b. The quantity of demand is greater than the quantity of supply. c. They move along the line from both ends to an equilibrium in the middle. d. The increase in demand causes an increase in supply.