Refer to Figure 4.1, which shows Molly's and Ryan's individual demand curves for compact discs per month. Assuming Molly and Ryan are the only consumers in the market, if the market quantity demanded is 5, the price must be

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

A) leave the industry. B) decrease its output. C) increase its output. D) not change its behavior.

Moral hazard

a. makes a free market in insurance hard to operate. b. is the tendency of insurance to encourage the source of risk. c. tends to make the cost of insurance higher and the market for insurance less efficient. d. All of the above are correct.