In markets with asymmetric information
A) asymmetric information causes moral hazard and then it causes adverse selection.
B) moral hazard causes adverse selection which in turn causes asymmetric information.
C) asymmetric information causes adverse selection and then it causes moral hazard.
D) adverse selection causes moral hazard which in turn causes asymmetric information.
C
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Initially the nominal interest rate is 8 percent and the inflation rate is 5 percent. People know that the inflation rate increases to 10 percent. What is the new nominal interest rate?
A) 8 percent B) 3 percent C) 13 percent D) 11 percent
A perfectly inelastic demand:
A. means people will quickly change the quantity they purchase when price changes. B. means people will not respond to any change in price. C. is demonstrated by a perfectly horizontal demand curve. D. has an absolute value greater than 1.
If the government wishes to encourage firms to internalize externalities, they should ________ activities resulting in negative externalities and ________ activities resulting in positive externalities
A. place an injunction against; tax B. tax; subsidize C. subsidize; tax D. ban; generate
If the expected future earnings of a company goes down, you would expect the price of its stock to
A. rise. B. fall. C. be unaffected. D. fall to zero.