How do online auction sites like Ebay attempt to overcome the asymmetric information problems associated with goods that the buyer cannot personally inspect before purchase? A) The online auction firm only allows high-quality merchandise to be sold at their site. B) The previous performance (reputations) of the buyer and seller are posted for public review. […]
The link between incentives and economic growth suggests a certain trade-off between equity and efficiency. Indicate whether the statement is true or false ANSWER T
As part of the most recent collective bargaining agreement with state employees, a state government must offer dental insurance at “reasonable, nonprofit rates.” The state plans to self insure in place of using a private insurance company. Statistical evidence suggests that the average household currently spends $300 per year for corrective dental work and $80 […]
What type of good is clean air? A) Rival and exclusive B) Nonrival and exclusive C) Rival and nonexclusive D) Nonrival and nonexclusive ANSWER D
Assume that a profit maximizing monopolist is producing a quantity such that marginal revenue exceeds marginal cost. We can conclude that the A) firm is maximizing profit. B) firm’s output is smaller than the profit maximizing quantity. C) firm’s output is larger than the profit maximizing quantity. D) firm’s output does not maximize profit, but […]
In closing down a military base, environmental inspectors found 100 tons of toxic waste. Which of the following is NOT a determinant of the consumer surplus generated by cleaning up 40 tons of waste? A) The price of removing a ton of toxic waste B) The original quantity of toxic waste found by the inspectors […]
A maximin strategy A) maximizes the minimum gain that can be earned. B) maximizes the gain of one player, but minimizes the gain of the opponent. C) minimizes the maximum gain that can be earned. D) involves a random choice between two strategies, one which maximizes potential gain and one which minimizes potential loss. […]
The demand curve for tickets to the George Winston concert (with special guest star, Kenny G) is given as follows: Q = 200 – 0.1P At a price of $30, what is the consumer surplus from concert tickets? A) $0 B) $20 C) $2,000 D) $1,970 E) $194,045 ANSWER E
Which would not increase the productivity of labor? A) An increase in the size of the labor force B) An increase in the quality of capital C) An increase in the quantity of capital D) An increase in technology E) An increase in the efficiency of energy ANSWER A
Strategies such as public funding of schools, compensatory education, pre-school programs, affirmative action, and campaign-finance reforms focus on the existence of inequality. Indicate whether the statement is true or false ANSWER F
