Econ 3357 Ch 14, 17, 18 Review

In the competitive output market for good Q, the marginal revenue product for an input X can be expressed as:

MPx * PQ

An increase in technology that enhances labor productivity will likely result in:

a increase in labor employment and a increase in the wage rate.

When asymmetric info problems drive high quality products from a market, we refer to this as:

adverse selection and a lemons problem.

Externalities

are not reflected in market prices, so they can be a source of economic inefficiency.

A presence of deposit insurance in the savings and loan industry

contributed to both "depositor moral hazard" and moral hazard by owners".

A firm should hire more labor when the marginal revenue product of labor:

exceeds the wage rate.

Asymmetric Info problems arise:

in both vertically and horizontally integrated firms.

Moral hazard in the insurance market, refers to:

individuals may change their behavior after insurance is bought, so they behave in a more high-risk manner.

When sellers have more info about products than buyers do, we would expect:

low quality goods to drive high quality goods out of the market.

The principal agent problem in corps exists because the managers of a firm

may pursuer their own goals even when the result is lower profit for owners.

Used cars sell for much less than new cars because

sellers know much more about the quality of used cars than buyers do.

The problem of adverse selection in insurance results in a situation in which:

unhealthy people become more likely to buy insurance than healthy people, which drives premiums up, and drives healthy people away...