What is moral hazard?
What will be an ideal response?
Moral hazard arises when one party to a contract passes the cost of his or her behavior on to the other party of the contract.
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If people have a sudden increase in confidence in the open economy of the U.S. and want to invest there, the interest rate:
A. increases, as NCO decreases. B. increases, as NCO increases. C. falls, as NCO falls. D. falls, as NCO increases.
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. Initially buyers believe that 50% of used refrigerators in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer refrigerators are sold in equilibrium?
A. 50 B. 125 C. 175 D. 250
In the above table, the cross price elasticity of demand for good X with good Y when PY falls from $20 to $18 is
A) -2. B) 0. C) +1. D) -1.
Governments choose to pursue industrial policy to:
A. raise tax revenue. B. spur economic growth. C. create publicly owned companies. D. regulate the growth of certain industries.