Since depositors, like any lender, only receive fixed payments while the bank keeps any surplus profits, they face the ________ problem that banks may take on too ________ risk
A) adverse selection; little
B) adverse selection; much
C) moral hazard; little
D) moral hazard; much
D
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The fact that most people make some decisions based on intuition rather than calculation is:
A. inconsistent with the cost-benefit model, but still rational. B. consistent with the cost-benefit model because most people intuitively weigh costs and benefits. C. consistent with the cost-benefit model because calculating costs and benefits is irrational. D. irrational, because intuition is usually wrong.
If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,
A) the employer benefits because wages will rise less than the change in actual prices. B) workers exactly keep pace with changes in the cost of living. C) workers benefit because the CPI increases more rapidly than does the cost of living. D) the CPI bias means that workers benefit if the price level rises and the employer benefits if the price level falls. E) the CPI bias means that workers benefit if the price level falls and the employer benefits if the price level rises.
Refer to Table 1-2. Using marginal analysis, how many hours should Julius extend his shop's hours of operations?
A) 2 hours B) 3 hours C) 4 hours D) 5 hours E) 6 hours
Most supermarkets charge the same price for the majority of goods sold. This suggest that
A) the large supermarket chains are price leaders and smaller grocers take these prices as given. B) mark-ups reflect the degree of competition in the supermarket industry. C) supermarkets have colluded to fix prices on most of the goods sold. D) the government regulates prices of most products sold in supermarkets.