Author Question: Governments are often forced to bail out large banks to prevent the entire economy from being ... (Read 142 times)

melly21297 · **on:** Jun 29, 2018

Governments are often forced to bail out large banks to prevent the entire economy from being affected adversely. This provision often encourages banks to invest in risky assets. This is an example of ________.

A) moral hazard
B) a positive externality
C) adverse selection
D) anchoring

Question 2

What is the biggest problem of using government actions such as taxes and pollution charges to control external costs?

A) insufficient legal power to enforce the controls
B) obtaining enough data to determine how much the tax or pollution charge will be
C) In some situations, there is no known way to control the external costs.
D) political lobbying and voter disagreement
E) The Coase theorem points out that taxes and pollution charges work only in the short run and not in the long run.

coyin · **Reply #1 on:** Jun 29, 2018

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