The insurance industry is susceptible to adverse selection problems, but not problems of moral hazard.
Answer the following statement true (T) or false (F)
False
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A college graduate in 1972 found a job paying $7,200. The CPI was 0.418 in 1972. A college graduate in 2005 found a job paying $30,000. The CPI was 1.68 in 2005. The 1972 graduate's job paid ________ in nominal terms and ________ in real terms than the 2005 graduate's job.
A. more; more B. more; less C. less; more D. less, less
The line showing potential GDP is a vertical straight line because
A) it represents the minimum level of real GDP in a recession. B) when nothing else changes, a higher price level has no effect on real GDP. C) the aggregate supply curve is upward sloping. D) economists are unsure about how to determine potential GDP. E) there is only one level of full employment at any point in time.
Matt has $2000 saved for a trip at Spring Break. Over Christmas break he decides to spend $400 of it on gifts instead of putting the gifts on his credit card, thus avoiding interest charges. He gradually replaces it in his savings account over the next two months. An economist would say this behavior is:
A. rational. B. irrational. C. utility minimizing. D. not observable.
The Massachusetts Turnpike is a state toll-road where cars and trucks pay a fee in proportion to the distance they travel and the weight of the vehicle. The road was built with federal funds in the 1960s, but the state must pay for maintenance. Given what you know about regulation, what do you think the toll charge for a particular car or truck represents?
a. the average variable cost of maintenance b. the marginal cost of maintenance c. the monopoly price d. price discrimination against bus passengers e. a lump-sum tax