When the market is in equilibrium,
a. Total surplus is minimized
b. Total surplus is maximized without government intervention
c. Government maximizes total revenue
d. None of the above
b
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A debt contract is incentive compatible
A) if the borrower has the incentive to behave in the way that the lender expects and desires, since doing otherwise jeopardizes the borrower's net worth in the business. B) if the borrower's net worth is sufficiently low so that the lender's risk of moral hazard is significantly reduced. C) if the debt contract is treated like an equity. D) if the lender has the incentive to behave in the way that the borrower expects and desires.
When people are educated, they become:
A. more productive to society, because they have more skills to apply to a job. B. less productive to society, because they stop working while in school. C. less productive to society, because they require higher pay per hour. D. more productive to society, because they are paid more.