A jury ordered McDonald's to pay $2.7 million to Stella Liebeck, a drive-through customer who burned herself with hot coffee after placing the cup between her legs to remove the top and add cream. She claimed that the coffee was too hot. This tells us that our legal system can:
A. lower costs by creating incentives to litigate frivolous suits.
B. promote efficiency by lowering transaction costs.
C. promote efficiency by making property rights secure.
D. raise costs by creating incentives to litigate frivolous suits.
Answer: D
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According to the figure above, the opportunity cost of producing another computer is
A) higher at A. B) higher at B. C) the same at every point along the frontier. D) different at most points along the frontier but equal at points A and B because they are equally distant from the axes.
If the functional form of the conditional variance function is incorrect, then
A) the standard errors computed by WLS regression routines are invalid B) the OLS estimator is biased C) instrumental variable techniques have to be used D) the regression R2 can no longer be computed
If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio, which of the following will happen?
A) Banks will have a reserve deficiency. B) Banks will have positive excess reserves. C) Banks will extend fewer loans. D) Banks will call in some of their loans to meet the reserve deficiency.
Which of the following government actions can hinder the economic development of a country?
A. It inhibits the growth of the financial and banking sector. B. It implements policies that increase inflation rates in a country. C. It adopts policies that effectively tax exports. D. All of these are correct.