Answer the following statement(s) true (T) or false (F)
1. A sandwich is an example of a club good.
2. Asymmetric information means both parties in a transaction share the same knowledge.
3. Used car sellers are at an advantage over buyers.
4. In adverse selection, one party takes advantage of knowing more than the other.
5. When one party in a sale is dishonest with the other, it is called moral hazard.
1. False
2. False
3. True
4. True
5. False
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Deadweight loss exists when a firm with market power restricts what to increase the price?
a. costs b. allocative efficiency c. output d. none of the above cause the price to increase
Taxing people according to their marginal valuations of a public good may be efficient, but it may not be fair if incomes differ
Indicate whether the statement is true or false
Suppose the equilibrium price and quantity of ketchup fall. The most likely explanation for these changes is:
A. an increase in the demand for ketchup. B. a decrease in the supply of ketchup. C. a decrease in the demand for ketchup. D. an increase in the supply of ketchup.
The demand for goods and services is called ____ demand, while the demand for resources is called ____ demand.
A. derived; derived B. final; final C. final; derived D. derive; final