Moral hazard occurs when:
a. Individuals and institutions do not bear the full cost of their own mistakes.
b.Individuals and institutions make immoral decisions based on greed.
c. General social decay leads to unethical business decisions.
d. The actions of one (or a few) result cause harm to others, when the same would not occur if the actions were by many.
e. All of the above are examples of moral hazard.
.A
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Comment on the following statement: "If the provision of public goods was left to private firms, the outcome would be more efficient than what occurs when the government provides them."
What will be an ideal response?
Price discrimination by a firm is
a. illegal under all circumstances. b. legal if the firm can show that the difference in the prices charged customers is justified by a difference in the costs of serving them. c. legal if the firm can show that the demand for its good is relatively elastic. d. legal under all circumstances.
An active stabilization policy designed to limit the size of government would
a. raise G to eliminate a recessionary gap and lower taxes to eliminate an inflationary gap. b. raise G to eliminate a recessionary gap and raise taxes to eliminate an inflationary gap. c. reduce taxes to eliminate a recessionary gap and raise G to eliminate an inflationary gap. d. reduce taxes to eliminate a recessionary gap and reduce G to eliminate an inflationary gap.
Each of the following factors contribute to the slope of the dynamic aggregate demand curve, except the:
A. extent to which monetary policymakers react to a change in current inflation. B. current level of technology. C. size of the response of aggregate expenditures to changes in the interest rate. D. strength of the effect of inflation on real balances.x