A minimum wage
A) increases all workers' surplus because the wage rate increases.
B) increases consumer surplus because the price of the good decreases.
C) decreases the firms' surplus because fewer workers are hired at the higher wage.
D) increases the firms' surplus and the workers' surplus because it increases the efficiency of the labor market.
E) None of the above answers is correct.
C
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Classical economists would cite all of the following as reasons why the government cannot smooth out the business cycle except that
A) only productivity shocks can cause real fluctuations in the business cycle. B) the government has imperfect knowledge of the economy. C) political constraints on policy actions prevent the government from carrying out effective policies. D) time lags between the onset of a recession and the implementation of effective countermeasures make anti-recessionary macroeconomic policies impractical.
The difference between moral hazard and adverse selection is that moral hazard is about:
A. actions that arise after the parties enter an agreement B. unobserved characteristics of people occurring before parties enter into an agreement. C. never happens when adverse selection is a problem. D. None of these statements is true.