High net worth helps to diminish the problem of moral hazard problem by
A) requiring the state to verify the debt contract.
B) collateralizing the debt contract.
C) making the debt contract incentive compatible.
D) giving the debt contract characteristics of equity contracts.
C
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In a market with information asymmetry, gains from trade occur if:
A) the value of the good to the seller is greater than its value to the buyer. B) the value of the good to the buyer is greater than its value to the seller. C) the variable cost of producing the good is zero. D) the opportunity cost of consuming the good is zero.
Income taxes tend to be favored over sales taxes _____
a. because of the excess burden on income taxes b. on the benefit principle c. on equity grounds d. as long as income as defined using the Haig-Simons definition