Mrs. Smith is given a government subsidy for an apartment in a public housing project. The apartment
A) is not subject to the principle of rival consumption.
B) is not a public good.
C) has widespread benefits and concentrated costs.
D) is subject to the free-rider problem.
B
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The decline in the US manufacturing sector was the result of:
a. increasing productivity in the manufacturing sector. b. the increasing ability of consumers to purchase foreign manufactured goods more cheaply. c. faster growth of the service sector. d. All of the above are correct. e. Only b and c are correct.
Each of the following is an example of moral hazard in which people modify their behavior in an opportunistic way, often frustrating the intent of governmental or management policies. Which is NOT an example of moral hazard?
a. After a firm gets a loan from a bank to purchase inventory, the borrower instead decides to use it to invest in call options on stocks. b. Based on motorcycle accident data, a state passes a law requiring motorcyclists to wear helmet, but then the motorcyclist wearing helmets start to drive faster and more recklessly. c. Bank and nonbank mortgage lenders make money granting loans. But the Government through Freddie Mac and Fannie Mae decides to purchase these loans. The mortgage lenders find that they earn a fee for each mortgage that they grant and then sell to Freddie Mac or Fannie Mae. Since they never intended on holding on to the mortgage, the mortgage granters are not too particular on whether the customer can really pay it back. The lowest quality loans are sold to the Government. d. A fellow buys a $1 million life insurance policy and then travels to Nepal to climb Mount Everest. e. A student learns that if he or she reads the chapter and studies lecture notes, the student does better on the next test.
The large budget deficits of the U.S. government in the 2000s have not increased domestic interest rates because:
A. foreigners were willing to buy the increased U.S. debt. B. businesses cut back on investment spending by an equal amount. C. Americans increased their rate of saving. D. the value of the U.S. dollar rose.
Shellee heads up a company that has a monopoly on a solar battery technology due to a patent. Shellee wants to raise the price by 50% to increase revenue by 50%. What is she forgetting?
a. When monopolists raises prices, they are breaking the law. b. When monopolists raise prices, demand falls. c. Monopolists cannot change revenue by changing prices. d. Monopolists do not get to price their own products.