One of the conclusions from Akerlof's paper titled "The Market for Lemons" was:
A. high quality goods will drive low quality goods out of the market.
B. lacking the ability to distinguish high from low quality, the quality the market will end up offering will be the average quality.
C. high quality is always demanded by consumers over low quality.
D. lacking the ability to distinguish high from low quality, low quality may drive high quality out of the market.
Answer: D
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The figure above shows the marginal social cost curve of generating electricity and the marginal private cost curve. The marginal cost borne by producers when 100 billion kilowatt hours are produced is
A) 5¢ per kilowatt. B) 10¢ per kilowatt. C) 15¢ per kilowatt. D) 20¢ per kilowatt. E) 0¢ per kilowatt.
The theory that there is no predictable trends in securities prices is the
A) opportunity cost of capital. B) random walk theory. C) capital reinvestment. D) present value.
Crowding out can best be defined as
A. private investment increases growth rates and decreases deficits. B. restrictive monetary policy raises interest rates and decreases investment. C. government deficits increase interest rates and decrease investment. D. consumption spending increases interest rates and decreases investment.
If entry is limited due to a limited input, firms in that market earn long run economic profit
Indicate whether the statement is true or false