In a market system entrepreneurs or the managers they hire must deal with risk. Discuss the incentives of these individuals when dealing with risk, relative to those of a central planner in a command economy
Please provide the best answer for the statement.
Entrepreneurs are guided in making decisions by the profit system (profit and loss system). They must deal with the risk and uncertainty associated with their business that can lead to profits or losses that they often feel directly. Wise decisions must be made to avoid unnecessary risks.
In a command economy, risk management is not as strong. Central planners are government employees may not be directly affected by the outcome of the risk. Employees of the government often receive the same salary no matter the outcome on a risky project or investment.
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The government's budget deficit is best represented by which of the following equations?
A) Budget deficit = Government purchases of goods and services + Transfer payments + Interest payments on existing debt + Seigniorage B) Budget deficit = Government purchases of goods and services + Transfer payments + Tax revenue+ Newly issued government bonds C) Budget deficit = Government purchases of goods and services + Interest payments on existing debt + Newly issued government bonds + Seigniorage + Transfer payments - Tax revenue D) Budget deficit = Government purchases of goods and services + Transfer payments - Tax revenue + Interest payments on existing debt
States with no-fault automobile insurance have lower crash fatality rates than states with ordinary automobile insurance
Indicate whether the statement is true or false
Advertising
a. provides information about products, including prices and seller locations. b. has been proven to increase competition and reduce prices compared to markets without advertising. c. signals quality to consumers, because advertising is expensive. d. All of the above are correct.
A market failure likely occurs when
A) the consumption of a good generates an effect on third parties. B) firm production lacks an externality on third parties. C) consumers are sovereign but firms are not sovereign. D) there is no much competition in a market.