Suppose that Harold buys collision insurance for his car and then drives it recklessly. This is an example of:
A. a positive spillover.
B. moral hazard.
C. adverse selection.
D. irrational behavior.
Answer: B
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Which of the following conditions hold true for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?
A) MR = P B) MC = ATC C) MC = P D) MR = MC
In repeated games:
A. players no longer need commitment strategies to reach a mutually beneficial equilibrium. B. players will never reach a mutually beneficial equilibrium. C. there are no dominant strategies. D. negative-negative outcomes are the only outcomes possible.
The PPP index:
A. describes the overall differences in poverty levels between countries. B. describes the overall inequality present in one country compared to another. C. describes the overall difference in prices between countries. D. None of these is true.
Using exchange rates, it is possible to price-compare in different nations. If an iPod costs $90 in the United States and €45 in France, in which nation would you get the better deal when the dollar-euro exchange rate is $2.50/€?
a. The iPod would be cheaper in France. b. The iPod would be cheaper in the United States. c. The iPod would cost the same in both countries. d. From the information provided, it is impossible to answer this question.