During pledge week your local public television station asks viewers to contribute to the station. People who watch public television but do NOT contribute are:
A. free-riding.
B. engaged in moral hazard.
C. those who do not value public television.
D. causing adverse selection.
Answer: A
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Firms rarely offer unlimited warranties on their products, because then their customers would be less careful with upkeep and maintenance. This situation is an example of
a. confiscation of rents. b. a speculative bubble. c. moral hazard. d. the principal-agent problem.
An increase in the capital stock will
A) flatten the production function. B) steepen the production function. C) shift the production function upward. D) shift the production function downward.
A sensible buyer will want to acquire additional information before committing herself as long as the expected value of the information she is gathering
A) is greater than the anticipated value of the purchase. B) is greater than the expected cost of acquiring it. C) will enable her to avoid all mistakes. D) will enable her to avoid possible mistakes she will subsequently regret having made.
The dominant school of thought prior to the 1930s was known as the:
a. Keynesian school. b. classical school. c. rational expectations school. d. supply-side school. e. monetarist school.