After people buy insurance, they are more likely to build a beach house out of wood framing rather than concrete block. This is an example of
A) risk aversion.
B) moral hazard.
C) risk neutrality.
D) free riding in teams.
B
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Most modern economic analysis is normative in nature, but involves questions with positive aspects
Indicate whether the statement is true or false
Which of the following statements correctly identifies a similarity between network effects and economies of scale?
A) Both are related to costs incurred by a firm. B) Both act as barriers to entry in a market. C) Both act as disincentives to monopolies. D) Both are related to the number of consumers using a firm's product.
Suppose Pippi buys an oven for her pizza parlor for $100,000. Pippi's pizza tasted so pitiful she went out of business 12 months later. She was able to sell the pizza oven for $75,000. This decrease in the value of the oven is
A) the total implicit rental rate on the oven. B) an economic loss. C) economic depreciation. D) interest forgone.
Explain how “herd behavior” affects the stock market and contributes to recession.
What will be an ideal response?