You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2% of the time, the claim rate will exceed 2% of warranty purchasers because
a. adverse selection will lead those who are more reckless to purchase the warranty
b. moral hazard will lead those who purchase to be more reckless
c. you systematically underestimate product failure rates
d. A and B
d
Economics
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The United States imposes a tariff on foreign limes. How does the tariff affect the U.S. price of a lime and the production of limes in the United States?
What will be an ideal response?
Economics
If a firm increases its output level by 50 percent and, as a result, long-run total cost rises by 40 percent, the firm is experiencing
a. diseconomies of scale b. constant returns to scale c. economies of scale d. increasing marginal returns e. diminishing marginal returns
Economics