If a state requires all drivers to purchase auto insurance, insurance companies still face the problem of
A) correctly pricing their insurance.
B) sunk costs.
C) adverse selection.
D) excess demand for their insurance.
Answer: A
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Which of the following is most likely if there is a war that destroys a country's stock of capital to a level below the steady state equilibrium?
A) The GDP will be equal to the steady-state equilibrium level of GDP. B) The investment in capital will suffice to replenish the depreciating capital. C) The GDP will be more than the steady-state equilibrium level of GDP. D) The investment in capital will be lower than the amount required to replenish the depreciating capital.
If the Fed sets a target exchange rate that is higher than the current exchange rate, then
A) the Fed must sell dollars. B) the Fed must buy dollars. C) the Fed can do nothing in the short run. D) will try to print more dollars for foreign distribution.
Suppose the market demand function for ice cream is Qd = 10 - 2P and the market supply function for ice cream is Qs = 4P - 2, both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The government revenue raised by the tax is:
A. $944,444. B. $2.67 million. C. $1.83 million. D. $4.50 million.
Why is the pricing outcome of a perfectly competitive firm efficient in economic sense?
What will be an ideal response?