Which of the following statements about the Coase theorem is true?
a. Underlying the results of the Coase theorem is the idea that private parties can bargain without cost over the allocation of resources.
b. The Coase theorem asserts that private solutions to externalities invariably lead to inefficient allocations of resources.
c. The Coase theorem applies to negative externalities, but not to positive externalities.
d. All of the above are correct.
a
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In which of the following situations would you hedge using a futures contract?
A. You are long in the cash market, the price is at a historical high, and you are certain that the price will decline. B. You are long in the cash market, the price is at a historical low, and you are certain that the price will increase. C. You are short in the cash market, the price is at a historical high, and you are certain that the price will decrease. D. You are short in the cash market, the price is at a historical low, and you are certain that the price will decrease further.
Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand
A) is constant. B) increases continuously. C) decreases continuously. D) may either increase or decrease.
Consider the perfectly competitive firm in the above figure. What will the firm choose to do in the short-run and why?
A) shut down because the firm incurs an economic loss B) stay in business because the firm is making an economic profit C) stay in business because the firm's economic loss is less than fixed costs D) stay in business because it is making zero economic profit
Insurance companies
A) pool risk and thereby lower people's utility. B) can earn a profit only if people are risk neutral. C) can increase risk averse people's utility. D) try to shift their customers' utility of wealth curves downward.