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Final Exam Economics (ECON 402) || Already Graded A+.
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Adverse Selection correct answers the problem of incomplete information - of choosing alternatives without fully knowing the details of available options Moral Hazard correct answers When the act of insuring an event increases the likelihood that the event will happen price elasticity of dema...

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  • August 16, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
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  • adverse selection

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Final Exam Economics (ECON 402) || Already Graded A+.
Adverse Selection correct answers the problem of incomplete information - of choosing
alternatives without fully knowing the details of available options

Moral Hazard correct answers When the act of insuring an event increases the likelihood that the
event will happen

price elasticity of demand correct answers a measure of how much the quantity demanded of a
good responds to a change in the price of that good, computed as the percentage change in
quantity demanded divided by the percentage change in price

Problem that economics studies correct answers scarcity

. To maximize the benefits associated with the consumption of a good, a rational consumer will
consume the good up to the point when

a.) the marginal costs begin to rise. b.) the marginal benefits begin to decline. c.) the marginal
benefit equals the marginal cost. d.) the marginal benefit is the highest. e.) the difference
between the marginal benefit and marginal cost is the highest correct answers the marginal
benefit equals the marginal cost

Which of the following government expenditures is closest to the idea of a pure public good?

National defense b.) Social security c.) Public tennis courts d.) Aid to the poor correct answers
National defense

Sheila works at Dunkin Donuts and just received a 20% increase in her hourly wage. As a result
of the increase, Sheila will

a.) want to work more hours. b.) want to work less hours. c.) want to work the same number of
hours. d.) any of the three outcomes are consistent with economic theory correct answers d.) any
of the three outcomes are consistent with economic theory

What types of markets most often suffer from both adverse selection and moral hazard?

a.) housing markets b.) labor markets c.) goods markets d.) insurance market correct answers
insurance markets

Suppose that we observe that the price of QLED TVs has decreased, while the number of
QLED TVs sold has increased. This is most consistent with:

a.) a decrease in demand. b.) a decrease in supply. c.) an increase in demand. d.) an increase in
supply. correct answers an increase in supply

A point inside the production possibility frontier is: correct answers inefficient

, A point outside the production possibility frontier is: correct answers unattainable

In the long run, economies of scale occur when an increase in output causes the cost per
unit of output to

a.) decrease. b.) increase. c.) stay the same. d.) become zero correct answers decrease

12. Which of the following best describes the role of households in a market economy?
a.) They are consumers in both the goods market and the market for resources/factors.
b.) They are suppliers in both the goods market and the market for resources/factors.
c.) They are consumers in the goods market and suppliers in the market for
resources/factors.
d.) They are suppliers in the goods market and consumers in the market for resources. correct
answers They are consumers in the goods market and suppliers in the market for
resources/factors.

13. When the marginal is less than the average, it must be true that

a.) the average is decreasing. b.) the average is increasing. c.) the marginal is decreasing. d.) the
marginal is increasing. correct answers a.) the average is decreasing.

14. Which of the following would most likely increase the demand for cereal?

a.) a decrease in the price of milk. b.) a decrease in the price of cereal. c.) a decrease in the price
of eggs. d.) all of the above could cause a decrease correct answers a.) a decrease in the price of
milk.

15. Assume that the market for corn is initially in equilibrium. Now, suppose that the price of
fertilizer increases. We would expect this to

a.) decrease (shift to the left/inward) demand. b.) decrease (shift to the left/inward) supply. c.)
decrease (shift to the left/inward) both demand and supply. d.) cause a surplus in the corn market
correct answers b.) decrease (shift to the left/inward) supply.

My marketing department has estimated that the price elasticity of demand for my good is
1.5. That means that
a.) a 6% increase in price will lead to a 9% decrease in quantity.
b.) a 6% increase in price will lead to a 4% decrease in quantity.
c.) a $6 increase in price will lead to a $9 decrease in quantity.
d.) a $6 increase in price will lead to a $4 decrease in quantity. correct answers a 6% increase in
price will lead to a 9% decrease in quantity.

Price Elasticity works in whole numbers or percentages? correct answers percentages

17. A perfectly inelastic supply curve is

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