1 Sometimes when two parties engage in a contract one party

1- Sometimes when two parties engage in a contract, one party agrees to insulate the other party from economic loss. This would be referred to as:

Select one:

a. asymmetric information

b. none of the answers

c. screening

d. moral hazard

e. adverse selection

2- A strategy where a firm charges a price below its own marginal cost in order to drive a rival out of business is called:

Select one:

a. none of the answers are correct

b. price-cost squeeze

c. two-part pricing

d. limit pricing

3- A risk adverse consumer prefers an uncertain prospect with a equal expected outcome to a sure thing

Select one:

True

False

4- An industry where there only a few large firms that must decide the QUANTITY of an item to produce is most likely defined as a:

Select one:

a. Sweezy Oligopoly

b. Bertrand Oligoploy

c. Stackelberg Oligopoly

d. none of the answers

Solution

Answer 1: The situation in which one party loss has been covered by another party is known as moral hazard. It is a situation in which one party protect another party from a risky adverse selection portfolio.

Answer 2 : Limit pricing means that charging price below there marginal cost in order to decreases the entry of the firm.limit pricing means limited the price in order to withdraw different firms from the market.

Answer 3 : The statement is true. As it shows that when risk adverse investors like the outcome of the business.

Answer 4 : Stackelberg oligopoly means that two firms react with each other and there are different reaction curve. These shows proper quantity determined in this scenario.