Signaling is the attempt by the uninformed side of the market to uncover the relevant but hidden characteristics of the informed party.
a. True
b. False
QUESTION 2Economists assume that firms seek to
a. maximize accounting profit
b. maximize economic profit
c. maximize total revenue
d. maximize normal profit
e. minimize cost
QUESTION 3Average revenue, demand, and price are all depicted by the same curve for a monopoly.
a. True
b. False
QUESTION 4Screening is the attempt by the uninformed side of the market to uncover the relevant but hidden characteristics of the informed party.
a. True
b. False
QUESTION 5A perfectly competitive firm has no control over the
a. quantity of output produced
b. quantities of inputs used
c. price of the product
d. type of good produced
e. types of inputs used
QUESTION 6Average revenue equals the change in total revenue divided by the change in the quantity of output produced.
a. True
b. False
QUESTION 7Which of the following is not related to adverse selection in insurance markets?
a. An insurance company has no way of distinguishing among applicants
b. An insurance company must charge a higher price to applicants who are good health risks
c. The price of insurance is attractive to poor health risks, but not to good ones
d. The insured group becomes less healthy on average
e. Because of the relative unhealthiness of the insured group, rates must rise
QUESTION 8The demand curve facing a perfectly competitive firm is
a. perfectly elastic
b. perfectly inelastic
c. unit elastic
d. downward-sloping
e. identical to the industry demand curve
QUESTION 9In order to sell an additional unit of its product, a monopolist must decrease price on all units.
a. True
b. False