After long hair for men became popular, barbers found that their incomes fell. In an attempt to boost their incomes, many barbers raised the price of a haircut and yet their total revenue fell even more. What can explain this result?
A) The demand for haircuts by barbers is elastic because of many substitutes.
B) The demand for haircuts by barbers became inelastic after the increase in price.
C) Haircuts are inferior products.
D) The demand for haircuts by barbers is inelastic because most people need haircuts.
E) None of the above can explain the phenomenon.
A
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Governments can affect the level of aggregate demand in a direct way by changing
a. government spending. b. exports. c. taxes. d. transfer payments.
In response to the financial crisis that began in 2007, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and encourage banks to be fiscally irresponsible
in the future. This illustrates: A. the adverse selection problem. B. the moral hazard problem. C. the principal-agent problem. D. logrolling.