Question

In: Economics

Part I. True/False/Uncertain/Explanation. Make sure you provide an explanation why you think the statement is True...

Part I. True/False/Uncertain/Explanation.

Make sure you provide an explanation why you think the statement is True or False or Uncertain. You get ZERO mark if you do not provide any explanation.

  1.   Perfect competition may lead to an equilibrium where P=MC (Price=Marginal Cost) and total surplus is maximized.
  2.   Provinces use Canada Health Transfer and Canada Social Transfer to provide public health and education.
  3.   If you were to drop out of college after attending for 3 years and completing 75% of all coursework, you could expect to earn about 75% of the college premium in the labor market.
  4.   Maria is halfway to work before she realizes that she forgot to lock the back door. Because she has renter’s insurance, she decides it is not worth being late just to go home to lock the door. This is a situation caused by moral hazard.

Solutions

Expert Solution

Answer (1) True

Explanation - ​​​​​​The perfect competition scenario maximizes the total surplus in the market however when production is more or less as compared to the competitive output then it eventually lowers total surplus.

Answer (2) True

Explanation- The Canada Health Transfer is a policy designed by the Canadian government to support Canada's health care act principles and provide predictable funding for health care and the Canada Social Transfer allows support of social assistance, post-secondary education, and the social services.

Answer (3) False

Explanation - It is wrong to say completion of 75% coursework will enable to earn about 75% of the college premium in the labor market as earning in the labor market is dependent on skills.  

Answer (4) True

Explanation - As even after realizing that she has forgotten to lock door Maria proceeded for work thinking she has renter insurance clearly shows the moral hazard; as it is immorale to claim insurance by committing the mistake knowingly.

Rahul Sunny answered 2 years ago
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