When a lack of information exists for parties to a deal:
A. it is always worth getting more information before making a decision.
B. the cost of acquiring information sometimes is prohibitive and not worth it.
C. an exchange will never happen.
D. the exchange will always happen anyway, with little chance of maximizing surplus.
B. the cost of acquiring information sometimes is prohibitive and not worth it.
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Potential GDP is the level of output produced when the unemployment rate is
A) equal to the natural unemployment rate. B) greater than the natural unemployment rate. C) less than the natural unemployment rate. D) zero. E) made up of only cyclical unemployment.
The difference between adverse selection and moral hazard is that
A) moral hazard happens at the time parties enter into a transaction; adverse selection occurs after the transaction takes place. B) moral hazard is the motive that is behind one party entering into a transaction with another party. Adverse selection refers to the other party being harmed by the transaction. C) moral hazard refers to the likelihood that a transaction will lead one party to be better off at the expense of the other party to the transaction. Adverse selection refers to the consequences of the transaction after it has occurred. D) adverse selection happens at the time parties enter into a transaction; moral hazard occurs after the transaction takes place.
Which of the following is used to explain why a consumer's willingness to buy a cell phone increases as the number of other people who own and use cell phones increases?
A) network externalities B) diminishing marginal utility C) market failure D) the income effect of a price change
If consumers expect that the price of pretzels will decrease next week, what would happen today?
A) Demand today for pretzels would decrease. B) Demand today for pretzels would increase. C) Demand today for pretzels would be unaffected. D) Supply today of pretzels would decrease.