1) If a firm can double inputs and, thereby, more than double output over the range of output the market demands, it is a
a. natural monopoly
b. Local monopoly
c. Price discrimination monopoly
d. Monopsony
e. Candidate for antitrust prosecution
2) The tendency for the poorest risks to buy health insurance and the tendency of the insured to take more risks with their health are known as
a. moral hazard and adverse selection, respectively
b. the winner's curse and adverse selection, respectively
c. adverse selection and natural selection, respectively
d. adverse selection and moral hazard, respectively
e. the winner's curse and moral hazard, respectively
3) Moral hazard occurs when a person's behavior changes in a way that
a. is immoral
b. is inherently dangerous
c. increases the chances of an unfavorable outcome
d. increases the likelihood of profit
e. raises the net welfare of society
4) If a seller knows more about the good than the buyer does, there exists
a. perfect information
b. an externality
c. a low marginal benefit of information for the buyer
d. asymmetric information
e. optimal search
5) The market demand curve for a public good
a. is the horizontal sum of all individual demand curves
b. is the vertical sum of all individual demand curves.
c. is upward sloping
d. is horizontal
e. does not exist
6) The rail system in Metropolis is a natural monopoly. If the government regulates the system by setting the fare equal to marginal cost, which of the following will be true?
a. Profit will be zero under regulation.
b. Only normal profit will be earned under regulation.
c. Accounting profit will be zero under regulation.
d. Economic loss will occur under regulation.