Suppose capital and labor must be used in fixed proportions to produce widgets and that the price ...

Suppose capital and labor must be used in fixed proportions to produce widgets and that the price elasticity of demand for widgets is zero. Then the wage elasticity of demand for labor by widget makers will be:
 a. +1.
  b. -1.
  c. 0.
  d. infinite.

QUESTION 2

Which of the following is not among the functions of contract?
 a. to provide incentives for efficient reliance
  b. to reduce transaction costs
  c. to discourage the development of asymmetric information
  d. to provide risk allocation mechanisms

QUESTION 3

An indication that Insurance companies anticipate adverse selection is
 a. they do not require a deductible
  b. they do not classify clients into different risk types according to their claim history
  c. they classify clients into different risk types according to pre-existing conditions
  d. they do not require a co-payment

QUESTION 4

The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except:
 a. what percentage of total costs are made up of labor costs.
  b. how much quantity demanded in the output market will be reduced by a higher price.
  c. the capital to labor ratio before the wage increase.
  d. how easily other inputs can be substituted for labor.

QUESTION 5

When manufacturers and distributors establish credible commitments to one another, they often employ
 a. vertical requirements contracts
  b. third-party monitoring
  c. credible threat mechanisms
  d. non-price tactics

QUESTION 6

An indication that Insurance companies anticipate adverse selection is
 a. they do not require a deductible
  b. they classify clients into different risk types according to their claim history
  c. they do not classify clients into different risk types according to pre-existing conditions
  d. they do not require a co-payment

QUESTION 7

The output effect of a change in the wage rate on a firm's demand for labor input will be greater:
 a. the larger the share of labor costs in total costs and the greater the price elasticity of demand for output.
  b. the larger the share of labor costs in total costs and the smaller the price elasticity of demand for output.
  c. the larger the share of labor costs in total costs and the higher the quantity demanded.
  d. the smaller the possibilities of substituting capital for labor.