Describe the lemons problem.
What will be an ideal response?
Suppose the average resale price for 1-year-old cars is $20,000, and you have a 1-year-old car in perfect condition, which is technically worth more than $20,000 because its quality is better than an average 1-year old car. But you may not be able to convince a potential buyer to pay a higher price for your car. Thus, you will end up keeping the car with you. This is called the lemons problem.
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Suppose the government runs a budget surplus in a given year. It can reduce its overall federal debt by
A) not buying anything on credit. B) forcing a change in net exports. C) increasing taxes on luxury items. D) buying back bonds it sold to the public.
Provide a concise statement about the relationship between a developing country's emphasis on the export of traditional commodities and:
(a) export earnings stability; (b) comparative advantage; (c) terms of trade.
What is the “cost disease of personal services” phenomenon and why does it help explain why tuition rates keep going up so fast?
What will be an ideal response?
Which of the following are leakages from the circular flow of income?
a. Savings, taxes, and imports b. Investment, government purchases, and exports c. Investment, taxes and bonds d. Imports, wages and taxes