The World Bank has extended loans to the government of a developing country to finance construction of a canal with a certain future flow of earmings Now, however, the government has decided to redirect those funds to build a casino that may or may not generate suficient profits to allow the government to repay the loan This situation is an example of
a. Systemic Risk
b. Moral Hazard
c. Adverse Selection
d. Asymmetric Information
e. Principle Agent Problem
The answer is b. Moral Hazard
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When a monopolistically competitive firm breaks even in the long run, this is equivalent to earning a zero accounting profit
Indicate whether the statement is true or false
A team of researchers has conducted a study of the well being of the citizens of the island nation of Zarasa
Using a scale from 1 (least happy) to 10 (most happy), the researchers find that citizens who earn 100 Zarutas per year have a mean happiness of 2.0, those who earn 200 Zarutas per year have a mean happiness of 6.0, and those who earn 300 Zarutas per year have a mean happiness of 7.0. The researchers should make which of the following conclusions? A) The utility of Zarasians increases with income. B) The marginal utility of Zarasians increases with income. C) The marginal utility of Zarasians decreases with income. D) both A and B E) both A and C
A shareholder in a corporation
A) may not sell his or her share of ownership in the business without the business dissolving. B) can earn interest, but not dividends, from the profits of the business. C) is a part owner of the business. D) is personally liable for the debts of the corporation.
A particular brand of toothpaste costs 4 British pounds in London. The nominal exchange rate is .80 and the real exchange rate is about 1.16 . These numbers imply that the U.S. price of the same toothpaste is about
a. $5.79 b. $4.29 c. $3.70 d. $2.76