An effective minimum wage tends to create unemployment among unskilled workers because it
A) reduces the demand for their labor services.
B) increases the supply of their labor services.
C) reduces the marginal productivity of their labor services.
D) reduces the quantity demanded for their labor services while increasing the quantity supplied of their labor services.
E) generates all of the above.
D
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The basic cause of deadweight losses from the existence of common resources and externalities is
A) the use of a market system to deal with scarcity. B) the self-interested rationality of human beings. C) the absence of government intervention. D) a lack of clearly defined and enforceable property rights.
In which of the following cases did someone use adverse selection?
a. Mr. Wong truthfully told Barbara he did not know how many horsepower his truck had when he sold it to her. b. Neither Mrs. Lin nor Mr. Hill knew anything about the antique desk in Mrs. Lin’s attic, but they both made up lies about it when Mr. Hill bought it. c. Miles knew that the boat motor he sold Mr. Sutton had a bad water pump and that Mr. Sutton did not know it, but Miles still did not mention it. d. Ms. Romano and Mr. Charles are both coin experts who knew exactly the worth of the silver dollar that Ms. Romano sold to Mr. Charles.