The types of problems in principal-agent relationships typically include
a. adverse selection - whom to hire
b. moral hazard - how to motivate workers
c. uncertainty - how many workers will be needed
d. A and B
QUESTION 2What measures would likely lower infant mortality rates in the United States?
a. Prenatal care programs in low-income neighborhoods.
b. Reduced drug use among expectant mothers.
c. Better nutrition.
d. Delaying childbearing beyond the teen-age years.
e. All of the above.
QUESTION 3Under a consumption-based theory of the pricing of risky assets, uncertain returns on such an asset should be discounted by a stochastic discount factor that takes into account:
a. the mean and standard deviation of the uncertain return.
b. whether the uncertain return has a normal distribution.
c. both the nominal and real interest rates.
d. the rate of time preference and present and future marginal utility of wealth.
QUESTION 4A potential problem arises in principal-agent relationships
a. because the agents' actions are not completely observed by the principals
b. because the principals' actions are not completely observed by the agents
c. because the agent's and the principals' actions are completely observed by each other
d. the observability of actions is irrelevant
QUESTION 5Which of the following would likely lead to the greatest improvement in health status of the population in the United States?
a. Higher per capita incomes.
b. More spending on public health, such as improved water supply and sanitation.
c. More medical care spending overall.
d. Improved lifestyles, including reductions in the use of tobacco, alcohol, and drugs.
e. More rural hospitals.
QUESTION 6A consumption-based theory of the determination of the real interest rate is based on the assumption that:
a. a rise in the real interest rate will increase current consumption.
b. the real interest rate must adjust to make people willing to experience changing consumption levels over time.
c. the real interest rate is determined by the supply and demand for investment and is therefore unaffected by consumption decisions.
d. the real interest rate must be positive.
QUESTION 7A potential problem arises in principal-agent relationships
a. because the agents and the principals have identical goals
b. because the principals may have different goals from the agents
c. because the agents may have different goals from the principals
d. the goals of principals and agents are irrelevant
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