Spot markets are an INEFFICIENT way for the firm to purchase inputs if:
A. profit sharing is used to compensate managers.
B. opportunism is a problem.
C. opportunism is a problem and suppliers engage in hold-up.
D. suppliers engage in hold-up.
Answer: C
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In the country of Konswano there are 4 people. Each person lives for 40 years. In their first 10 years, they earn no income. In the next 20 years, they earn $40,000 per year and in the last 10 years they earn no income
Each year their consumption is $20,000. If everyone in Konswano is 25 years old, then the Lorenz curve for income is ________. A) above the Lorenz curve for wealth B) above the line of equality C) equal to the line of equality D) below the Lorenz curve for wealth
When a citizens' group opposes expansion of the prison located in town, the basis of the opposition is that the larger prison will produce
a. a negative externality for the community b. a positive externality for the community c. more jobs in the community d. tax revenue for the community e. improved criminal justice options
Which of the following is an example of an undesirable side effect of the operation of the market mechanism?
a. negative externalities b. comparative advantages c. abstractions d. productivity growth
Suppose that a negative externality creates $1 billion worth of costs to third parties. The government attacks the problem with regulations that cut the cost of the externality to $500 million but cost business and consumers $1.5 billion. This situation illustrates the idea that:
A. correcting market failure can result in government failure. B. getting rid of externalities requires a great deal of necessary sacrifice for all of us. C. externalities can never be corrected. D. regulations are an effective way to curb externalities.