In the 1973 movie Save the Tiger, Jack Lemmon plays Harry Stoner, the CEO of a clothing manufacturer whose business has fallen on hard times. In one of the key scenes of the movie, Stoner tries to convince his partner that they should hire someone to
burn one of their buildings in order to collect on their insurance policy. Harry Stoner's actions are an example of
A) adverse selection.
B) moral hazard.
C) self-interest.
D) asymmetric information.
Answer: B
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If in the short run the demand for mass transit is inelastic and in the long run the demand is elastic, then a price:
A. decrease will decrease total revenue in the short run and decrease total revenue in the long run. B. increase will increase total revenue in the short run but decrease total revenue in the long run. C. increase will decrease total revenue in the short run but increase total revenue in the long run. D. decrease will increase total revenue in the short run but decrease total revenue in the long run.
Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?
A. If product demand was price-inelastic B. If marginal revenue was greater than marginal cost. C. If product demand was price-elastic. D. If marginal cost was greater than marginal revenue.
Purposeful behavior means that:
A. people are selfish in their decision making. B. people weigh costs and benefits to make decisions. C. people are immune from emotions affecting their decisions. D. decision makers do not make mistakes when weighing costs and benefits.
One reason it took so long to have a central bank in the United States is that:
A. state currencies worked fine. B. it wasn't needed. C. states feared centralization of power. D. all of the answer options are correct.