You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2 of the time, the claim rate will exceed 2 of warranty purchasers because
a. adverse selection will lead those who are more reckless to purchase the warranty
b. moral hazard will lead those who purchase to be more reckless
c. you systematically underestimate product failure rates
d. Both A&B
QUESTION 2After graduating from college, Jim had three choices, listed in order of preference: (1) Move to Florida from Philadelphia, (2) work in a car dealership in Philadelphia, or (3) play soccer for a minor league in Philadelphia. His opportunity cost of moving to Florida includes
a. the benefits he could have received from playing soccer
b. the income he could have earned at the car dealership
c. both a and b
d. cannot be determined from the given information
QUESTION 3Holding other things constant, if the Japanese Yen, depreciates, it makes the imports to Japan
a. More expensive for Japanese customer
b. Less expensive for Japanese customers
c. Neither more or less expensive for importers
d. None of the above
QUESTION 4You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2 of the time,
a. you should price the warranty at less than 2 of the product price
b. you should price the warranty at exactly 2 of the product price
c. you should price the warranty at more than 2 of the product price
d. Cannot tell from this information
QUESTION 5James used 200,00 . from his savings account that paid an annual interest of 10 to purchase a hardware store. After one year, James sold the business for 300,000 . An Economist calculated his profit to be:
a. 300,000
b. 100,000
c. 80,000
d. 20,000
QUESTION 6Holding other things constant, if the Japanese Yen, appreciates, it makes the Japanese products
a. Less attractive to US customers
b. More attractive to US customers
c. Neither more nor less attractive to US customers
d. None of the above
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