Asymmetric information before a transaction takes place generates the problem of
A. adverse selection.
B. bank runs.
C. moral hazard.
D. irrational behavior.
Answer: A
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If Quick Auto Service increases the size of its shop, enabling it to purchase cost-saving capital equipment so that the cost of servicing a car falls, this would be an example of
A) economies of scope. B) economies of scale. C) monitoring. D) increasing transactions costs.
Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for almonds. Which panel best describes what happens in this market when there is an increase in the productivity of almond harvesters?
A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d)
Which of the following is false? a. The money supply will tend to rise when the Fed pays a lower interest rate on bank reserves
b. If banks never wanted to hold excess reserves, decreasing the interest rate the Fed pays on reserves would increase the money supply. c. If banks hold excess reserves, the actual money multiplier would be less than potential money expansion. d. All of the above are true
Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation?
A. The law of diminishing marginal utility. B. The law of diminishing returns. C. Return equalization principle. D. The principal-agent problem.