If a buyer in an economic transaction has more information than the seller, the buyer benefits at the expense of the seller. This phenomenon is due to
A) moral hazard.
B) adverse selection.
C) economically irrational behavior.
D) gains from trade.
Answer: B
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In a two-period model with default, the nation defaults on its debt in the current period if
A) the market interest rate is high, the cost of defaulting is low, and national debt is high. B) the market interest rate is low, the cost of defaulting is low, and national debt is high. C) the market interest rate is high, the cost of defaulting is high, and national debt is low. D) the market interest rate is low, the cost of defaulting is high, and national debt is low.
An important characteristic of private goods is
A. the principle of joint consumption. B. the principle of conspicuous consumption. C. the nonexclusion principle. D. the principle of rival consumption.