For this section, write whether the statements are True or False or Uncertain (if you say...

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For this section, write whether the statements are True or False or Uncertain (if you say...

For this section, write whether the statements are True or False or Uncertain (if you say uncertain, have enough evidence to back your answer just as much as the true or false responses). Explain your answer and use diagrams where necessary.

(a) In an oligopolistic market, two identical firms can charge more for the same product than if there were 100 markets selling the identical product.

(b) In a developing country, the government can implement an interest rate cap in order to increase investments with positive NPV and reduce adverse effects of high interest rates.

(c) A risk-neutral car insurance company will insure a low-risk driver over a high-risk driver even if there are no moral hazards or asymmetric information in this market.

(d) Lack of defined property rights can lead to misallocation of resources and negative externalities.

business economics

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Answer 1

Answer #1

a. True. In an oligopoly , there are a few firms in the market and generally sell at higher prices as compared to the market structure where there are many firms in the market.

b. True. The statement is true is a developing country where the government can implement an interest rate cap in order to increase investments with positive NPV and reduce adverse effects of high interest rates.

c. False. The statement is false because a risk neutral car company will be indifferent between a low risk driver and a high-risk driver.

d. True. Lack of well defined property rights can lead to the problem of commons and thus lead to misallocation of resources.

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Answer 2

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