Moral hazard is
A) the tendency for people to enter into agreements in which they can use their private information to their own advantage and to the disadvantage of the less informed party.
B) when one of the parties to an agreement has an incentive after the agreement is made to act in a manner that brings additional benefits to himself or herself at the expense of the other party.
C) a situation in which only bad quality items are bought and sold.
D) an action taken outside a market that conveys information that can be used by that market.
B
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In the long-run equilibrium in a perfectly competitive market,
A) the firms make an economic profit. B) the firms' owners make a normal profit. C) the average total cost is maximized. D) marginal cost is at a minimum.
When demand is elastic, a fall in price causes total revenue to rise because
A) when price falls, quantity sold increases so total revenue automatically rises. B) the increase in quantity sold is large enough to offset the lower price. C) the percentage increase in quantity demanded is less than the percentage fall in price. D) the demand curve shifts.