You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2% of the time,
a. you should price the warranty at less than 2% of the product price
b. you should price the warranty at exactly 2% of the product price
c. you should price the warranty at more than 2% of the product price
d. Cannot tell from this information
c
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When calculating real GDP, the reference base year
A) allows us to account for changes in GNP compared to GDP. B) always reduces the value of GDP compared to GNP. C) allows us to calculate the value of the goods and services in terms of prices of that base year. D) usually increases the value of GNP compared to GDP. E) allows us to increase the value of goods and services.
Specialization allows for
A) more consumption for all trading partners. B) more consumption for the trading partner with the comparative advantage. C) more consumption for the trading partner with the absolute advantage. D) equal consumption among trading partners.
Appendix: Incentive-compatible revelation mechanisms attempt to
a. induce an employee to reject the next best alternative employment opportunity b. elicit privately-held information c. secure enforcement primarily by third parties d. reject voluntary contracting with third parties e. impose similar risk premiums on all employees
If a firm is experiencing diminishing marginal returns, its marginal product is declining
a. True b. False