Upon buying a car with airbags, Indy begins to drive recklessly. This is an example of the:
A. principal-agent problem.
B. adverse selection problem.
C. moral hazard problem.
D. free-rider problem.
Answer: C
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Which statement is true?
A. There are over 50 million Americans living below the poverty line. B. The poverty line is raised each year. C. Nearly all the nation's poor people live in the South. D. Poverty is a greater problem today than at any time since the end of World War II.
The following was heard on a primetime news cast. "The government has just increased the sales tax. This is unfair to consumers, particularly the poor, because budgets are already stretched far enough. It would have been much more fair for the government to have levied an excise tax on firms as a way of making big business give back to the community." Explain why the person's argument is more than likely incorrect. Be sure to discuss whether the person has over or understated the effect of the tax on consumers and producers.
What will be an ideal response?
By adjusting its spending level, the government can try to achieve target employment and GDP levels through
a. countercyclical monetary policy b. buying bonds on the open market c. shifting the Phillips curve d. wage and price controls e. countercyclical fiscal policy
A firm in a perfectly competitive market structure
a. will advertise to shift its demand curve to the right b. has a demand curve for its good that is perfectly vertical c. cannot influence the price d. has a demand curve for its good that is downward sloping e. has a demand curve for its good that is upward sloping