To keep employees from shirking, you can invest in greater monitoring
a. because monitoring is inexpensive
b. especially when monitoring is not very efficient
c. when employees respond well to incentive contracts
d. when incentives solve both moral hazard and adverse selection problems with employees
QUESTION 2The dead-weight loss from an excise tax
a. is greater if demand is perfectly inelastic.
b. is caused by a shift in consumer preferences when the tax is raised.
c. is the lost surplus that results from higher prices and lower output resulting from the tax.
d. is of little concern to policy makers since all excise taxes are sin taxes.
e. is the difference between consumer surplus and producer surplus.
QUESTION 3The rate of return refers to:
a. the increase in future output made possible by investing one unit of current output in capital accumulation.
b. the dividend payments made on corporate issued stock.
c. the increase in current output made possible by investing in units of future output in capital accumulation.
d. the rate at which capital depreciates.
QUESTION 4Which is NOT an example of moral hazard
a. people eat more at all-you-can-eat buffets
b. loggers clear-cut a tract of land rather than when paying per tree felled
c. Drivers of heavier, safer cares are more likely to run stop signs
d. workers paid an hourly wage work harder than those on commission
QUESTION 5Within the framework of economics, optimization means providing a good or service until
a. total benefits are maximized.
b. total benefits and total costs are equal.
c. marginal benefits exceed marginal costs by the greatest amount possible.
d. marginal benefits and marginal costs are equal.
e. as long as total benefits are greater than total costs, any amount may be optimal under the right circumstances.
QUESTION 6A monopsonist that faces a labor supply curve of the form l = 4w and has a constant marginal revenue product of 50 per unit of l, will opt for the following, w, l combination:
a. w = 10 l = 40.
b. w = 25 l = 100.
c. w = 50 l = 200.
d. w = 100 l = 400.
QUESTION 7Which is NOT an example of moral hazard
a. people eat more at all-you-can-eat buffets
b. loggers clear-cut a tract of land rather than when paying per tree felled
c. Drivers of heavier, safer cares are less likely to run stop signs
d. workers on commission work harder than those paid an hourly wage
QUESTION 8Suppose the demand curve for medical care services is perfectly inelastic. What will happen to the equilibrium price and quantity if supply increases?
a. Price and quantity will rise.
b. Price will stay the same and quantity will rise.
c. Price and quantity will fall.
d. Price will fall and quantity will increase.
e. Price will fall and quantity will stay the same.
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