?For a mortgage lender that makes mortgage loans to borrowers, which one of the following would be an example of adverse selection?
a. After the loan has been made, individuals become careless with their finances
b. Individuals most likely to default are the ones most likely to apply for the loan
c. Borrowers investing their loan proceeds differently than the bank requires
d. None of the above
Answer: b. Individuals most likely to default are the ones most likely to apply for the loan
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Commercial airlines have two primary suppliers of large jet aircraft: Boeing and Airbus
Since millions of people fly with commercial airlines each year, should these aircraft manufacturers be required to incorporate every possible safety feature into the aircraft they manufacture? Should the manufacturers be allowed to incorporate no safety features? If some safety considerations are to be required, how would an economist decide on which features to include and which not to include?
The real balance effect (wealth effect), the interest rate effect, and the net exports effect all help to explain the:
A. decrease in supply in the loanable funds market. B. large federal budget deficit. C. increase in short-run aggregate supply. D. downward-sloping aggregate demand curve.
If the MRP of land is less than its price, a firm should
A. use less land. B. increase the price it is willing to pay for land. C. try to decrease the productivity of land. D. use more land.
Refer to the graph shown. Assume that the market is initially in equilibrium at a price of $6 and a quantity of 40 units. If the government imposes a $2 per-unit tax on this product, the deadweight loss from the tax will be:
A. 80. B. 70. C. 60. D. 10.